<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
<TABLE>
<S> <C>
For the quarterly period ended: September 30, 1997 Commission file number: 019020
</TABLE>
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 7, 1997 11,001,346
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<PAGE> 2
OPTIMA PETROLEUM CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS................................................ 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...........................................13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................15
SIGNATURES
-2-
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPTIMA PETROLEUM CORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS (unaudited) (audited)
CURRENT
Cash and cash equivalents $ 6,946,802 $ 2,055,062
Cash held in trust - current 249,168 --
Accounts receivable 2,168,145 2,516,578
Note receivable - current portion 125,376 124,423
-------------- --------------
9,489,491 4,696,063
OTHER
Cash held in trust - long term 691,281 638,142
Advances to operators 584,553 468,864
Note receivable - long term portion 250,753 373,269
Petroleum and natural gas interests, full cost method (Note 3) 20,659,523 34,764,350
Deferred charges 222,733 273,980
-------------- --------------
$ 31,898,334 $ 41,214,668
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 916,255 $ 2,676,605
Current portion of long-term debt -- 730,947
-------------- --------------
916,255 3,407,552
LONG-TERM DEBT 138,110 6,119,670
SITE RESTORATION AND ABANDONMENT 200,505 215,018
SHAREHOLDERS' EQUITY
Share capital (Note 4)
Authorized 100,000,000 common shares
Issued 11,000,846 (1996 - 11,318,894) common shares 30,886,244 31,790,695
Contributed surplus 608,222 608,222
Deficit (851,002) (926,489)
-------------- --------------
30,643,464 31,472,428
-------------- --------------
$ 31,898,334 $ 41,214,668
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 4
OPTIMA PETROLEUM CORPORATION
Consolidated Statements of Operations and Deficit
(unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING INCOME
Petroleum and natural gas sales $ 1,892,262 $ 3,094,028 $ 6,467,944 $ 8,972,277
Royalties and production taxes 809,067 639,256 2,220,222 1,917,765
Operating costs 251,917 353,358 691,157 1,016,952
----------- ----------- ----------- -----------
831,278 2,101,414 3,556,565 6,037,560
EXPENSES
General and administrative (Schedule) 384,863 396,817 1,296,867 1,233,474
----------- ----------- ----------- -----------
EARNINGS BEFORE INTEREST,
DEPLETION, DEPRECIATION,
AMORTIZATION AND INCOME TAXES 446,415 1,704,597 2,259,698 4,804,086
Gain on sale of Canadian petroleum
and natural gas interests (Note 2) 117,937 -- (583,414) --
Interest revenue (95,775) (5,374) (157,046) (15,529)
Depletion and depreciation 716,417 1,196,122 2,411,212 3,341,603
Interest and bank charges 1,538 163,741 144,782 474,716
Amortization of deferred financing costs 17,082 17,094 51,247 51,247
Foreign exchange loss 18,250 3,312 56,239 6,905
----------- ----------- ----------- -----------
NET INCOME
BEFORE INCOME TAXES (329,034) 329,702 336,678 945,144
INCOME TAXES 1,191 -- 261,191 20,104
----------- ----------- ----------- -----------
NET INCOME (LOSS) FOR THE PERIOD (330,225) 329,702 75,487 925,040
DEFICIT, beginning of period (520,777) (559,724) (926,489) (1,155,062)
----------- ----------- ----------- -----------
DEFICIT, end of period $ (851,002) $ (230,022) $ (851,002) $ (230,022)
=========== =========== =========== ===========
INCOME (LOSS) PER SHARE $ (0.03) $ 0.03 $ 0.01 $ 0.09
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 5
OPTIMA PETROLEUM CORPORATION
Consolidated Statements of Changes In Financial Position
(unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Income (loss) for the period $ (330,225) $ 329,702 $ 75,487 $ 925,040
Items not involving cash
Gain on sale of Canadian petroleum
and natural gas interests (net of 119,128 -- (322,223) --
Depletion, depreciation and amortiza 733,499 1,213,216 2,462,459 3,392,850
------------ ------------ ------------ ------------
522,402 1,542,918 2,215,723 4,317,890
Changes in non-cash working capital:
Accounts receivable 727,911 399,365 348,433 (2,243,238)
Accounts payable and accrued liabili (647,872) (132,208) (1,760,350) (297,421)
Net working capital
adjustments on sale of Canadian
petroleum and natural gas intere (119,128) -- (636,388) --
Debenture receivable -- -- -- 493,874
------------ ------------ ------------ ------------
483,313 1,810,075 167,418 2,271,105
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Issue (repurchase) of
common shares (net of expenses) (544,880) 374,666 (904,451) 1,858,403
Repayment of bank debt 60 (175,353) (6,712,507) (5,520)
Collection of note receivable (164) 654 121,563 (494,533)
------------ ------------ ------------ ------------
(544,984) 199,967 (7,495,395) 1,358,350
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Proceeds from the sale of
petroleum and natural gas interests -- 56 16,750,000 1,179,681
Petroleum and natural gas interests (1,160,676) (950,536) (4,112,287) (4,199,368)
Advances to operators (302,220) (957,979) (115,689) (189,458)
Cash held in trust (249,469) -- (302,307) --
Deferred charges -- (112) -- (2,648)
------------ ------------ ------------ ------------
(1,712,365) (1,908,571) 12,219,717 (3,211,793)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH (1,774,036) 101,471 4,891,740 417,662
CASH AND CASH
EQUIVALENTS, beginning of period 8,720,838 1,339,116 2,055,062 1,022,925
------------ ------------ ------------ ------------
CASH AND CASH
EQUIVALENTS, end of period $ 6,946,802 $ 1,440,587 $ 6,946,802 $ 1,440,587
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE> 6
OPTIMA PETROLEUM CORPORATION
Schedules of Consolidated General and Administrative Expense
(unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Consultants $ 180,025 $ 180,805 $ 564,252 $ 499,018
Office expense 74,291 63,771 276,695 176,113
Legal, audit and tax 36,752 30,767 148,901 151,381
Investor communication 46,989 31,059 137,855 180,288
Public listing 1,421 4,073 32,308 33,421
Office rent 31,571 17,211 81,028 58,871
Travel 12,899 62,626 52,212 127,877
Directors 915 6,505 3,616 6,505
---------- ---------- ---------- ----------
$ 384,863 $ 396,817 $1,296,867 $1,233,474
========== ========== ========== ==========
</TABLE>
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<PAGE> 7
OPTIMA PETROLEUM CORPORATION
Notes to Consolidated Financial Statements
September 30, 1997
(unaudited)
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, 1996, as filed with the Securities and Exchange
Commission.
The consolidated financial statements included herein as of
September 30, 1997, and for the three and nine month periods ended
September 30, 1997 and 1996 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, 1997 and the results of operations and
cash flows for the three and nine month periods ended September 30,
1997 and 1996.
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 6,
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. All intercompany transactions and balances have been
eliminated.
(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.
-7-
<PAGE> 8
OPTIMA PETROLEUM CORPORATION
Notes to Consolidated Financial Statements
September 30, 1997
(unaudited)
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.
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) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Significant areas
requiring the use of management estimates relate to the
determination of rates for depreciation, depletion and amortization
and the impairment of petroleum and natural gas interests. Actual
results could differ from these estimates.
(h) Fair value of financial instruments
Financial instruments include cash and cash equivalents, accounts
receivable, note receivable, accounts payable and accrued
liabilities and the current and long term portions of long term
debt. Fair values approximate carrying values for these financial
instruments since they are short term in nature, receivable or
payable on demand, or bear interest at floating rates.
-8-
<PAGE> 9
OPTIMA PETROLEUM CORPORATION
Notes to Consolidated Financial Statements
September 30, 1997
(unaudited)
2. SALE OF CANADIAN PETROLEUM AND NATURAL GAS INTERESTS
On May 30, 1997 the Company closed the sale of a substantial portion of
its Canadian petroleum and natural gas interests for cash proceeds of
$16,750,000. Previously reported interim results for March 31, 1997 have
been restated to exclude the operating results of the Canadian petroleum
and natural gas interests from January 1, 1997, the effective date of the
disposition.
The following pro-forma summary presents comparative consolidated results
of operations as if the disposition had occurred at the beginning of 1996:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Petroleum and natural gas sales $ 1,892,262 $ 2,464,937 $ 6,467,944 $ 6,749,282
Net income (loss) for the period (330,225) 354,908 75,487 920,978
Income (loss) per share (0.03) 0.04 0.01 0.09
=========== =========== =========== ===========
</TABLE>
These pro-forma results have been prepared for comparative purposes only
and do not purport to be indicative of what would have occurred had the
disposition been made as of these dates or of results which may occur in
the future.
3. PETROLEUM AND NATURAL GAS INTERESTS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Petroleum and natural gas interests $ 35,760,257 $ 50,200,530
Other equipment 204,854 176,271
------------ ------------
35,965,111 50,376,801
Accumulated depreciation, depletion and write-offs (15,305,588) (15,612,451)
------------ ------------
$ 20,659,523 $ 34,764,350
============ ============
</TABLE>
As at September 30, 1997, unproved properties with capitalized costs of
$2,576,311 (December 31 - $4,441,055) were not subject to depletion. It is
expected that these properties will be evaluated over the next one to
three years.
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<PAGE> 10
OPTIMA PETROLEUM CORPORATION
Notes to Consolidated Financial Statements
September 30, 1997
(unaudited)
4. SHARE CAPITAL
(a) Issued
<TABLE>
<CAPTION>
Number of Capital
Shares Stock
---------- -----------
<S> <C> <C>
Balance at December 31, 1996 11,318,894 $31,790,695
In lieu of consulting fees 5,052 18,339
Shares repurchased and
canceled under Normal Course Issuer Bid (323,100) (922,790)
---------- -----------
Balance at September 30, 1997 11,000,846 $30,886,244
========== ===========
</TABLE>
Subsequent to September 30, 1997, 500 common shares were issued for
cash proceeds of $1,815 in lieu of consulting fees.
(b) Reserved in respect of options
<TABLE>
<CAPTION>
Exercise Exercisable
Holder Number Price On or Before
- - ------------------------------- --------- -------- -------------
<S> <C> <C> <C>
Company directors and employees 193,000 $3.50 April 3, 1998
50,000 $3.55 April 3, 1998
100,000 $4.05 July 25, 1999
525,000 $4.15 June 12, 1999
50,000 $3.50 June 2, 1999
Non-related persons 120,000 $3.50 April 3, 1998
125,000 $3.50 June 2, 1999
--------- -------- -------------
1,163,000
=========
</TABLE>
(c) Net income (loss) per share
Net income (loss) per share has been calculated based on the
following weighted average numbers of shares outstanding:
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
------------- -------------
<S> <C> <C>
Weighted average number of shares 11,212,969 10,816,953
========== ==========
</TABLE>
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<PAGE> 11
OPTIMA PETROLEUM CORPORATION
Notes to Consolidated Financial Statements
September 30, 1997
(unaudited)
5. RELATED PARTY TRANSACTIONS
In the nine months ended September 30, 1997, the Company was charged
consulting expenses of $313,335 (1996 - $282,150) by companies related by
virtue of common directors. Office expense includes $88,200 paid to a
related company.
6. RECONCILIATION BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA
AND THE UNITED STATES
(a) Accounting for income taxes
Under the asset and liability method of Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), deferred income tax
assets and liabilities, reduced by a valuation allowance to an
amount more likely than not to be recovered, are measured using
enacted tax rates for the future income tax consequences
attributable to differences between the financial statement carrying
amount of existing assets and liabilities and their respective tax
bases. The approximate effect of each component of deferred income
tax assets and liabilities at December 31, 1996 is as follows:
<TABLE>
<S> <C>
Net operating losses $ 8,911,000
Petroleum and natural gas interests (4,977,000)
------------
Net deferred tax assets 3,934,000
Less valuation allowance (3,934,000)
------------
Deferred tax assets, net of valuation allowance $ -
============
</TABLE>
The valuation allowance equals the entire amount of the net deferred
tax assets as the recognition criteria for deferred tax assets has
not been met. Therefore, there is no effect of applying the
provisions of SFAS 109 on the Company's financial statements.
(b) Consolidated statements of changes in financial position
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; and
(ii) the issuance of shares on settlement of consulting fees and
directors fees payable.
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<PAGE> 12
OPTIMA PETROLEUM CORPORATION
Notes to Consolidated Financial Statements
September 30, 1997
(unaudited)
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,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from:
Operating activities $ 488,758 $ 1,824,595 $ 185,757 $ 2,298,185
Financing activities (550,429) 185,447 (7,513,734) 1,331,270
Investing activities (1,712,365) (1,908,571) 12,219,717 (3,211,793)
------------ ------------ ------------ ------------
Increase
(decrease) in cash $ (1,774,036) $ 101,471 $ 4,891,740 $ 417,662
============ ============ ============ ============
</TABLE>
Under United States accounting principals the following
supplementary cash flow information would be disclosed:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest paid $ 1,538 $ 163,741 $ 144,782 $ 474,716
============ ============ ============ ============
Income tax paid $ 1,191 -- $ 261,191 $ 20,104
============ ============ ============ ============
</TABLE>
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<PAGE> 13
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. $1.4073
as at November 7, 1997.
<TABLE>
<CAPTION>
Working Interest Quarter Ended September 30 1997 1997
- - ---------------- -------------------------------------------------- -------------- -----------
1996 1996 Increase Percentage
USA Canadian (Decrease) in Increase
CDN$ 1997 Operations Operations USA Operations (Decrease)
----------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Volume
Natural Gas (mcf) 287,952 418,853 392,688 (130,901) (31%)
Oil (bbls) 33,010 34,150 5,324 (1,140) (3%)
Average Price per Unit
CDN
Natural Gas (mcf) $ -- $ -- $ 1.18 N/A N/A
Oil (bbls) $ -- $ -- $ 31.22 N/A N/A
USA
Natural Gas (mcf) $ 3.49 $ 3.45 $ -- $ 0.04 1%
Oil (bbls) $ 26.90 $ 29.86 $ -- $ (2.96) (10%)
Gross Revenue,
Natural Gas $ 1,004,168 $ 1,445,231 $ 462,875 $ (441,063) (31%)
Oil $ 888,094 $ 1,019,706 $ 166,216 $ (131,612) (16%)
----------- ----------- ----------- ----------- -----------
Total Revenue $ 1,892,262 $ 2,464,937 $ 629,091 $ (572,675)
=========== =========== =========== =========== ===========
Earnings, before Interest,
depletion, amortization
and taxes ("EBITDA")
per Share $ 0.04 $ 0.11 $ 0.04 $ (0.07) (63%)
=========== =========== =========== =========== ===========
Income(Loss) per Share $ (0.03) $ 0.04 $ (0.01) $ (0.07) N/A
=========== =========== =========== =========== ===========
</TABLE>
References to "BOE" in the analysis below mean barrels of oil equivalent. For
the purposes of this discussion BOE is calculated by converting gas to
equivalent barrels at a ration of 6 mcf per barrel.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
The following discussion reflects the disposition of a substantial portion of
the Company's Canadian petroleum and natural gas interests. For clarity, the
Company's remaining U.S. operations are analyzed against comparative U.S.
operations for the same quarter in the previous year.
In comparing the quarters ended September 30, 1997 and 1996, the disposition
accounted for a sale of the Canadian operations accounts for a reduction of
$692,091 in total revenue, $461,582 in cash flow and 70,772 BOE of production.
For information concerning the disposition, reference should be made to Note 2
of the Consolidated Financial Statements as provided in Part I of this report.
-13-
<PAGE> 14
OVERVIEW
An comparison of EBITDA between U.S. operations showed a decline of 74% from
$1,243,015 to $446, 415 (from $0.11 to $0.04 per share) due to operating revenue
declines combined with a $225,000 retroactive adjustment to royalties booked in
the quarter.
Income per share for the U.S. operations also decreased by $0.07 per share from
the 1996 third quarter to the 1997 third quarter, or from net income of $329,702
to a net loss of $(329,034). The gain on the sale of Canadian petroleum and
natural gas interests was adjusted downward due to the payment of unanticipated
Canadian crown royalty adjustments for the 1994-96 period.
The weighted average number of shares was 11,212,969 at September 30, 1997 as
compared to 10,816,953 at September 30, 1996.
OPERATING REVENUES
A 130,901 mcf decrease in gas volumes in the U.S. is responsible for 78% of the
$572,675 decrease in total revenue. The remaining decrease results from a $2.96
decrease in U.S. oil prices between the 1997 and 1996 third quarters.
Additionally, delays in our development drilling program at Backridge and East
Haynesville have resulted in new producing wells not coming onstream until the
latter part of the fourth quarter, 1997.
Oil production accounts for 54% of the Companies output in the quarter, as
compared to 45% in the prior year.
OPERATING EXPENSES
Comparative operating costs in the U.S. operations increased 35% from $186,415
in the third quarter of 1996. These costs were $2.85 per BOE in the quarter in
1997 as compared to $1.79 per BOE in 1996. The increases are attributable to
workovers performed in the Company's Valentine properties in the quarter.
INTEREST EXPENSE
Interest and bank charges decreased to $1,538 in the third quarter of 1997 from
$163,741 in the same period in 1996, a decrease of 99%. The change is due to a
payout of the bank loans at the end of May 1997.
DEPLETION, DEPRECIATION AND AMORTIZATION
The decrease in depletion and depreciation for the quarter reflects decreased
production volumes. On a BOE basis, the 1997 quarter's expense was $8.84 per BOE
as compared to $7.65 per BOE in the U.S. last year. Depletion and depreciation
in the U.S. for the year ended December 31, 1996 was $9.57 per BOE.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses for the quarter decreased 4% to $384,863 as
compared to the third quarter of 1996. Due production decreases, and to the
disposal of 37% of the production base in the third quarter of 1996,
administrative costs increased from $2.27 per BOE in 1996 to $4.35 per BOE in
1997.
BALANCE SHEET
The sale of the Canadian operations has made a significant impact on the balance
sheet. Total assets at September 30, 1997 were $31, 898,334 as compared to
$41,214,668 a year earlier and $33,421,251 as at June 30, 1997. Working capital
was $8,573,236 at the end of the third quarter of 1997 as compared to $2,917,301
a year earlier. Property additions and drilling costs of $1,160,676 and along
with the repurchase of 204,000 common shares for $544,880 reduced working
capital by $1,604,823 as compared to June 30, 1997. To date, a total of 350,000
common shares have been repurchases at an average cost of $2.92 per share.
CERTAIN OF THE FOREGOING STATEMENTS MAY BE DEEMED "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE SECURITIES EXCHANGE ACT OF 1934. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, THERE CAN BE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT. CERTAIN RISKS AND UNCERTAINTIES INHERENT IN THE COMPANY'S BUSINESS
ARE SET FORTH IN THE FILINGS OF THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE RISKS INCLUDE PRICE CHANGES FOR OIL AND GAS, RISKS REGARDING
ESTIMATES OF RESERVES, PRODUCTION RISKS, GOVERNMENTAL REGULATIONS AND GENERAL
RISKS REGARDING THE EXPLORATION FOR, AND THE PRODUCTION OF, OIL AND GAS
RESERVES.
-14-
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
There was no Form 8-K filed during the quarter ended September 30, 1997.
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: August 13, 1997 By: /s/ R.L. Hodgkinson
Robert L. Hodgkinson
President - CEO
By: /s/ R.P. Bourgeois
Ronald P. Bourgeois
Chief Financial Officer - Secretary
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIRD
QUARTER 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINACIAL
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,946,802
<SECURITIES> 0
<RECEIVABLES> 2,168,145
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,489,491
<PP&E> 35,965,111
<DEPRECIATION> 15,305,588
<TOTAL-ASSETS> 31,898,334
<CURRENT-LIABILITIES> 916,255
<BONDS> 138,110
0
0
<COMMON> 30,886,244
<OTHER-SE> (242,780)
<TOTAL-LIABILITY-AND-EQUITY> 31,898,334
<SALES> 6,467,944
<TOTAL-REVENUES> 7,208,404
<CGS> 2,911,379
<TOTAL-COSTS> 6,619,458
<OTHER-EXPENSES> 252,268
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 144,782
<INCOME-PRETAX> 336,678
<INCOME-TAX> 261,191
<INCOME-CONTINUING> 75,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,487
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
