SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission File No. 33-55254-32
CHANCELLOR GROUP, INC.
___________________________________________________________
(Exact name of small business issuer as specified in its
charter)
Nevada 87-0438647
________ ____________
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1800 E. Sahara, Suite 107, Las Vegas, Nevada 89104
_____________________________________________________________
(Address of principal executive offices, including zip code)
Issuer's Telephone Number: (702) 938-0261
______________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the Issuer (1) filed all
reports required to be filed by Section 13 or
15(d) of the 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.
Yes X No
____ ____
As of March 31, 1999, 17,950,361 shares of common stock
were outstanding.
Transitional Small Business Disclosure Format:
Yes X No
____ ____
<PAGE>
TABLE OF CONTENTS
Form 10-QSB
1st Quarter Ended March 31, 1999
Chancellor Group, Inc.
Page
PART I: FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheet 2
Consolidated Statement Of Operations 3
Consolidated Statement Of Cash Flows 4
Notes To Consolidated Financial Statements 5
Item 2.
Management's Discussion And
Analysis Or Plan Of Operation 8
PART II: OTHER INFORMATION 9
SIGNATURES 10
<PAGE>
PART I. FINANCIAL INFORMATION
<PAGE> 1
ITEM 1. CHANCELLOR GROUP, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(UNAUDITED)
ASSETS
Oil and gas properties $ 35,905
_____________
Total Assets $ 35,905
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 306,009
____________
Total current liabilities 306,009
____________
Total Liabilities 306,009
____________
Stockholders' equity
Common stock: $.001 par
value, 250,000,000 shares
authorized, 17,950,361
shares issued
& outstanding 17,950
Preferred Series B stock:
$1,000 par value,
250,000 shares authorized,
48,000 issued and outstanding
at March 31, 1999 48,000,000
Paid in capital (47,510,662)
Accumulated deficit ( 777,392)
____________
Total Stockholders' Equity ( 270,104)
____________
Total Liabilities And
Stockholders' Equity $ 35,905
============
See Notes to Consolidated Financial Statements
<PAGE> 2
CHANCELLOR GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
1998 1999
____ ____
Sales $ - $ -
Operating expenses 54,724 60,001
_________ _________
Income (loss) from
operations ( 54,724) ( 60,001)
_________ _________
Income (loss) before provision
for income taxes ( 54,724) ( 60,001)
Provision for income tax - -
_________ _________
Net income (loss) $( 54,724) $( 60,001)
========= =========
Net income (loss) per share
(Basic and fully diluted) $( *) $( *)
========= =========
Weighted average number of
common shares outstanding 15,174,668 17,950,361
========== ==========
*less than $.01 per share
See Notes to Consolidated Financial Statements
<PAGE> 3
CHANCELLOR GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
1998 1999
____ ____
Cash Flows From Operating Activities:
Net income (loss) $( 54,724) $( 60,001)
Adjustments to reconcile net
income (loss) to net cash
provided by (used for)
operating activities:
Accounts pay. and accrued expenses 54,724 60,001
_________ _________
Net cash provided
by (used for)
operating activities - -
_________ _________
Net Increase (Decrease) In Cash - -
Cash At The Beginning Of The Period - -
_________ _________
Cash At The End Of The Period $ - $ -
========= =========
See Notes to Consolidated Financial Statements
<PAGE> 4
CHANCELLOR GROUP, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to
Form 10-QSB and do not include all of the information and
disclosures required by generally accepted accounting
principles for complete financial statements. All
adjustments which are, in the opinion of management,
necessary for a fair presentation of the results of
operations for the interim periods have been made and are
of a recurring nature unless otherwise disclosed herein.
The results of operations for such interim periods are not
necessarily indicative of operations for a full year.
<PAGE> 5
CHANCELLOR GROUP, INC.
Supplemental Information (Unaudited)
Period Ended March 31, 1999
Capitalized Costs Relating to Oil and Gas
Producing Activities at March 31, 1999
- ------------------------------------------
Unproved oil and gas properties $ -
Proved oil and gas properties 35,905
Support equipment and facilities -
-----------
35,905
Less accumulated depreciation,
depletion, amortization, and
impairment ( -)
-----------
Net capitalized costs $ 35,905
===========
Costs Incurred in Oil and Gas Producing
Activities for the Period
Ended March 31, 1999
- ---------------------------------------
Property acquisition costs
Proved $ -
Unproved -
Exploration costs -
Development costs -
Results of Operations for Oil and Gas Producing
Actvities for the Period Ended March 31, 1999
- -------------------------------------------------
Oil and gas sales $ -
Gain on sale of oil and gas properties -
Gain on sale of oil and gas leases -
Production costs -
Exploration expenses -
Depreciation, depletion,
and amortization -
-----------
-
Income tax expense -
-----------
Results of operations for oil and gas
producing activities (excluding
corporate overhead and financing
costs) $ -
===========
Reserve Information
The following estimates of proved and proved developed reserve
quantities and related standardized measure of discounted net cash flow
are estimates only, and do not purport to reflect realizable values or
fair market values of the Company's reserves. The Company emphasizes that
reserve estimates are inherently imprecise and that estimates of new
discoveries are more imprecise than those of producing oil and gas
properties. Accordingly, these estimates are expected to change as future
information becomes available. All of the Company's reserves are located
in the United States.
Proved reserves are estimated reserves of crude oil (including
condensate and natural gas liquids) and natural gas that geological and
engineering data demonstrate with reasonable certainty to be recoverable
in future years from known reservoirs under existing economic and operating
conditions. Proved developed reserves are those expected to be recovered
through existing wells, equipment, and operating methods.
The standardized measure of discounted future net cash flows is
computed by applying year end prices of oil and gas (with consideration of
price changes only to the extent provided by contractual arrangements)
to the estimated future production of proved oil and gas reserves, less
estimated future expenditures (based on year end costs) to be incurred in
developing and producing the proved reserves, less estimated future income
tax expenses (based on year end statutory tax rates, with consideration of
future tax rates already legislated) to be incurred on pretax net cash flows
less tax basis of the properties and available credit, and assuming
continuation of existing economic conditions. The estimated future net cash
flows are then discounted using a rate of 10 percent a year to reflect
the estimated timing of the future cash flows.
<PAGE> 6
CHANCELLOR GROUP, INC.
Supplemental Information (Unaudited) - Continued
Period Ended March 31, 1999
Reserve Information
- -------------------
Oil Gas
(Bbls) (Bcf)
------ ------
Proved developed and undeveloped reserves
Beginning of period - 249.50
Revisions of previous estimates - -
Improved recovery - -
Purchases of minerals in place - -
Extensions and discoveries - -
Production - -
Sales of minerals in place - -
------- -------
End of period - 249.50
======= =======
Proved developed reserves
Beginning of period - -
End of period - -
Standardized Measure of Discounted Future
Net Cash Flows at March 31, 1999
Future cash inflows $ 580,013,502
Future production costs ( 77,681,437)
Future development costs ( 22,535,000)
Future income tax expenses (163,131,002)
-------------
316,666,063
Future net cash flows (10% annual discount for
estimated timing of cash flows) (120,536,224)
-------------
Standardized measures of discounted future net cash
flows relating to proved oil and gas reserves $(120,536,224)
=============
The following reconciles the change in the standardized measure of
discounted future net cash flow during the three months
ended March 31, 1999.
Beginning of period $(120,536,224)
Sales of oil and gas produced, net of production costs ( xx)
Net changes in prices and production costs ( xx)
Extensions, discoveries, and improved recovery,
less related costs xx
Development costs incurred during the period which
were previously estimated xx
Net change in estimated future development costs xx
Revisions of previous quantity estimates ( xx)
Net change from purchases and sales of minerals in place ( xx)
Accretion of discount xx
Net change in income taxes ( xx)
Other ( xx)
-------------
End of period $(120,536,224)
<PAGE> 7
CHANCELLOR GROUP, INC.
ITEM 2. Management's Discussion and Analysis or Plan of
Operation
The Company was originally incorporated in Utah in 1986 and reincorporated in
Nevada in 1993. In July, 1995, the Company acquired all of the issued capital
of two Kentucky based gas operations, Delstar Gas Systems, Inc. ("DGS") and
Northstar Gas Systems, Inc. ("NGS"), covering gas reserves and gas
transmission systems respectively. In December 1995, the Company formed a
wholly owned subsidiary in the state of Kentucky, Delstar Resources, Inc.
("DRI"). This subsidiary acquired additional freehold real estate and gas
reserves for $5,425,000. In September, 1997, the Company acquired 100%
ownership of Radly Petroleum, Inc. ("Radly"), a Texas corporation, in exchange
for approximately 80% of the Company's outstanding common stock. In July 1998
the Company acquired 100% ownership of Lichfield Petroleum America, Inc.,
("Lichfield"), a Texas corporation. Chancellor Group, Inc., Radly, Lichfield,
DGS, NGS, and DRI operate and remain as separate legal entities. The Company
has taken an impairment writedown of the assets of DGS, NGS, and DRI until
such time as certain disputes relating to the original acquisition agreements
for DGS and NGS by and between the Company and the former owners of those
subsidiaires are resolved. Management expects that such dispute will be
resolved in its favour in 2000.
The Company's officers and directors are currently implementing an extensive
business plan, through which the Company will raise new equity capital to
finance the initial development work of its existing Texas gas assets, recover
operating control of and finance the redevelopment of the extensive Kentucky
gas assets, and acquire interests in several important new drilling and
redevelopment projects.
Results of Operations
The results for the quarter ended March 31, 1999 show an increase in current
liabilities to $306,009, compared to $246,008 for the previous quarterly
period, ending December 31, 1998. The Company generated no revenue during
the period covered by this report. A comparison with figures for the
corresponding period last year is meaningless, as the Company had not yet
commenced trading.
The sole activity of the Company during the quarter was the restoration to
full regulatory compliance and the continued preparation for the growth,
financing, and development of the Company's business assets.
The Company did not issue any securities during the quarter covered by this
report.
Liquidity and Capital Resources
The consolidated Balance Sheet as of March 31, 1999 reports no increase in
current or noncurrent assets. Current liabilities have increased to
$306,009 during the year to date, comprised principally of increases in
deferred and unpaid compensation due to two officers of the Company, and
general operating expenses.
Day to day general operating expenses are paid out of pocket by officers of
the Company, and from time to time these expenses are invoiced to the
Company for payment. As of the date of this report, no such invoiced amounts
had yet been rendered to the Company.
Impact of inflation
The Company believes that its activities are not materially affected by
inflation.
<PAGE> 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters To A Vote of Securities Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
<PAGE> 9
SIGNATURES
In accordance with the requirements of the Exchange
Act, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
CHANCELLOR GROUP, INC.
By: /s/Shane X.G. Rodgers
Shane X.G. Rodgers, President
and Director
Date: April 30, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AT 03/31/99 (UNAUDITED)
AND STATEMENT OF OPERATIONS FOR THE QUARTER ENDED 03/31/99
(UNAUDITED). IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 35905
<DEPRECIATION> 0
<TOTAL-ASSETS> 35905
<CURRENT-LIABILITIES> 306009
<BONDS> 0
0
48000000
<COMMON> 17950
<OTHER-SE> (48288054)
<TOTAL-LIABILITY-AND-EQUITY> 35905
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 54724
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (54724)
<INCOME-TAX> 0
<INCOME-CONTINUING> (54724)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54724)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
