UNITED STATES 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, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
-------- --------
Commission file number: 0-22782
FRONTIER NATURAL GAS CORPORATION
----------------------------------------------------
(Exact name of small business issuer in its charter)
Oklahoma 73-1421000
- - ------------------------- ---------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
500 Dallas, Suite 2920, Houston, Texas 77002
-------------------------------------------------------------------------
(Address of registrant's principal executive offices, including zip code)
(713) 739-7100
----------------------------------------------------
(Registrant's telephone number, including area code)
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 [ ]
9,865,906 shares as the registrant's common stock were outstanding as of
May 14, 1997.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
<PAGE>
FRONTIER NATURAL GAS CORPORATION
REPORT INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996 (Unaudited) 3
Consolidated Statements of Operations for the three
months ended March 31, 1997 and 1996 (Unaudited) 5
Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION 12
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FRONTIER NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
1997 1996
----------- -----------
Current assets:
Cash and cash equivalents $ 3,869,789 $ 4,956,656
Accounts receivable, net of allowance
for doubtful accounts of $10,533 at
March 31, 1997 and December 31, 1996 320,134 366,498
Prepaid expenses and other 140,308 282,317
Receivables from affiliates 175,501 152,419
----------- -----------
Total current assets 4,505,732 5,757,890
Property and equipment:
Gas and oil properties, at cost -
successful efforts method of accounting 5,472,555 5,280,115
Other property and equipment 1,145,146 1,074,727
----------- -----------
6,617,701 6,354,842
Less accumulated depletion, depreciation (2,923,690) (2,918,918)
and amortization ----------- -----------
3,694,011 3,435,924
Other assets 220,580 437,378
----------- -----------
Total assets $ 8,420,323 $ 9,631,192
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
FRONTIER NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1996 1997
--------------- ------------
Current liabilities:
Accounts payable $ 713,462 $ 725,222
Revenue distribution payable 186,479 360,163
Current portion of long-term debt 405,737 304,540
Accrued and other liabilities 414,974 271,805
----------- -----------
Total current liabilities 1,720,652 1,661,730
Long-term debt 228,417 325,394
Non-recourse debt 864,000 681,618
Other long-term liabilities 239,448 223,624
----------- -----------
Total liabilities 3,052,517 2,892,366
Stockholders' equity:
Cumulative convertible preferred
stock $.01 par value; 5,000,000
shares authorized; 85,961 shares
issued and outstanding at
March 31, 1997 and December 31, 1996;
($859,610 aggregate liquidation
preference at March 31, 1997 and
December 31, 1996) 860 860
Common stock:
Class A Common stock, $.01 par value;
20,000,000 shares authorized;
9,865,906 outstanding at March 31, 1997
and December 31, 1996 98,659 98,659
Unamortized value of warrants issued (47,535) (54,325)
Common stock subscribed 45,000 45,000
Common stock subscription receivable (45,000) (45,000)
Additional paid-in capital 14,599,326 14,599,326
Deficit (9,283,504) (7,905,694)
----------- -----------
Total stockholders' equity 5,367,806 6,738,826
----------- -----------
Total liabilities and stockholders'
equity $ 8,420,323 $ 9,631,192
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
FRONTIER NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
-----------------------------------
1997 1996
--------------- ----------
Revenues:
Gas and oil revenues $ 327,435 $1,091,963
Loss on commodity transactions (121,937) -----
Gain on sale of assets 132,035 13,285
Operating fees 14,234 73,010
Other revenues 53,880 71,948
--------------- ----------
Total revenues 405,647 1,250,206
--------------- ----------
Costs and expenses:
Lease operating expense 96,698 166,567
Production taxes 8,784 77,163
Transportation and gathering
costs 90,394 128,873
Gas purchases under deferred
contract ----- 82,461
Depletion, depreciation and
amortization 132,774 431,998
Exploration costs 852,626 105,542
Interest expense 4,133 97,353
Deferred gas contract settlement ----- 368,960
General and administrative expense 572,260 560,515
------------- ----------
Total costs and expenses 1,757,669 2,019,432
------------- ----------
Loss before provision for income taxes (1,352,022) (769,226)
Benefit (provision) for income taxes ----- -----
------------- ----------
Net loss (1,352,022) (769,226)
Cumulative preferred stock dividend 25,788 25,788
------------- ----------
Net loss applicable to common
stockholders $ (1,377,810) $ (795,014)
============= ==========
Net loss per common and common
equivalent share $ (0.19) $ (0.16)
------------- ----------
Weighted average number of common
equivalent shares (in thousands) 7,142 5,058
============= ==========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
FRONTIER NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
-------------------------------
1997 1996
--------------- ------------
Cash flows from operating activities:
Net income (loss) $ (1,352,022) $ (769,226)
Adjustments to reconcile net loss
to net cash
provided by operating activities:
Depletion, depreciation and
amortization 132,774 431,998
Deferred gas contract settlement ----- 368,960
Gain on sale of assets (132,035) (13,285)
Deferred revenues under gas contract ----- (74,400)
Amortization of financing costs 14,134 44,712
Exploration costs 852,626 105,542
Other 15,181 -----
Changes in operating assets and
liabilities:
Accounts receivable (23,282) (55,084)
Prepaid expenses and other 170,295 (4,264)
Other assets ----- (13,279)
Accounts payable (11,760) (248,756)
Revenue distribution payable (173,684) (25,732)
Accrued and other 158,993 (45,230)
-------------- -----------
Net cash (used) in operating
activities (348,780) (298,044)
-------------- -----------
Cash flows used in investing
activities:
Capital expenditures - gas and oil
properties (1,330,312) (1,617,501)
Capital expenditures - other property
and equipment (73,646) (565)
Proceeds from sale of assets 540,568 595,769
------------- -----------
Net cash provided by (used in)
investing activities (863,390) (1,022,297)
------------- -----------
Cash flows from financing activities:
Proceeds from issuance of debt 225,534 4,278,455
Repayments of long-term debt (74,443) (179,272)
Debt issuance costs ----- (165,158)
Payment for settlement of deferred
gas contract ----- (2,181,489)
Preferred stock dividends paid (25,788) -----
------------- -----------
Net cash provided by financing
activities 125,303 1,752,536
------------- -----------
Net increase (decrease) in cash
and cash equivalents (1,086,867) 432,195
Cash and cash equivalents at beginning
of year 4,956,656 63,908
------------- -----------
Cash and cash equivalents at end of year $ 3,869,789 $ 496,103
============= ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 34,157 $ 134,568
============= ===========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
FRONTIER NATURAL GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL PRESENTATION
The Condensed Consolidated Financial Statements herein have been prepared
by the Company without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). As applicable under such
regulations, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes that the
presentation and disclosures herein are adequate to make the information not
misleading, and the financial statements reflect all elimination entries and
adjustments, all of which are of a normal recurring nature, which are necessary
for a fair statement of the results for the three months ended March 31, 1997
and 1996.
Operating results for interim periods are not necessarily indicative of the
results for full years. It is suggested that these condensed consolidated
financial statements be read in conjunction with the consolidated financial
statements for the year ended December 31, 1996 and the related notes thereto
included in the Company's Annual Report on Form 10-KSB filed with the SEC.
2. DISPOSITION OF OIL AND GAS PROPERTIES
In the first quarter of 1996 the Company sold several properties in
Oklahoma for consideration totaling $77,109, and realized a net gain of $13,285.
In the first quarter of 1997 the Company divested its interest in a well located
in Oklahoma and a portion of its interest in a prospect located in South
Louisiana for a total of $381,321 and realized a gain of $166,143. This gain was
partially offset by a realized loss of $34,108 which was associated with the
relocation of the Company headquarters to Houston, Texas.
3. PREFERRED DIVIDENDS
The Board of Directors of the Company declared a quarterly dividend of $.30
per share on the Company's outstanding cumulative convertible preferred stock.
The dividend was paid January 30, 1997 to stockholders of record at the close of
business January 20, 1997.
4. COMMITMENTS AND CONTINGENCIES
The Company has entered into employment agreements with certain employees.
Two of these agreements expire December 31, 1999 (and automatically renew for
additional one-year terms each December 31 unless specifically terminated by
either the Company or employee). The agreements provide for salaries for each
person and in addition, each of said two employees shall be entitled to receive
deferred compensation, provided the employee remains employed with the Company
until expiration of the initial term of his agreement and that he has not been
terminated for cause thereunder. Such deferred compensation shall be an annual
payment equal to the product of $9,000 multiplied by the number of years the
employee is employed by the Company commencing July 1, 1993 (up to a maximum of
ten years, and payments commence the year the Employee reaches age 65 or retires
from the Company, whichever is later). Deferred payments shall be paid for a
maximum of 15 years thereafter. The liability for these payments is being
accrued over a ten year period commencing July 1, 1993.
The Company also has employment agreements with two other employees. Both
agreements expire on December 31, 1997 and automatically renew for successive
one-year terms unless terminated by either the Company or the employee. The
agreements provide for salaries as well as certain incentive compensation. All
agreements contain provisions prohibiting the disclosure to third parties of
proprietary information relating to the Company.
The Company has entered into an agreement with a director to serve as a
consultant to the Company. The consulting agreement provides for the director to
furnish exploration and production oversight services on the Company's existing
properties and prospects in the Mid-Continent Area and prospect generation and
7
<PAGE>
FRONTIER NATURAL GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
evaluation services on the Company's existing 3-D seismic data over acreage in
the Mid-Continent Area, for a period of 23 months commencing on May 1, 1996 for
a monthly compensation of $10,000. This consulting agreement was entered into in
settlement of a previously existing employment agreement which would have been
more costly to the Company and for a longer period of time.
Pursuant to the credit agreement with the bank, the Company entered into a
natural gas swap agreement on 62,500 MMBTU of natural gas per month at $1.566
per MMBTU for Mid-Continent gas for the period from April 1, 1996 through
January 31, 1999. The swap was amended to 31,250 MMBTU on September 25, 1996,
due to the sale of the N.E. Cedardale field. The Company recorded a loss of
$212,000 in connection with this reduction in quantities covered by the swap
agreement. The unrealized loss on the amended swap agreement was $258,821 at
March 31, 1997.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis reviews Frontier Natural Gas
Corporation's operations for the three month periods ended March 31, 1997 and
1996 and should be read in conjunction with the consolidated financial
statements and notes related thereto. Certain statements contained herein that
set forth management's intentions, plans, beliefs, expectations or predictions
of the future are forward-looking statements. It is important to note that
Frontier's actual results could differ materially from those projected in such
forward-looking statements. The risks and uncertainties include but are not
limited to potential unfavorable or uncertain results of 3-D seismic surveys not
yet completed, drilling cost and operational uncertainties, risks associated
with quantities of total reserves and rates of production from existing gas and
oil reserves and pricing assumptions of said reserves, potential delays in the
timing of planned operations, competition and other risks associated with
permitting seismic surveys and with leasing gas and oil properties, potential
cost overruns, regulatory uncertainties and the availability of capital to fund
planned expenditures as well as general industry and market conditions.
Overview
The Company's exploration activities for 1997 continued to center around
furthering its Gulf Coast Projects, and in particular, the transition zones of
South Louisiana which it initiated in 1995. The Company's main emphasis was in
furthering acquisition and financing of the Starboard Prospect. The Company
moved its headquarters to Houston, Texas, in September 1996, to allow the
Company to more effectively exploit opportunities in these primary areas of
exploration.
During 1996, the Company raised funds through a bank financing agreement,
issued stock in a public offering, sold producing properties which no longer fit
the Company's business plan, and obtained partners for its exploration
activities.
The Company has what it considers to be an aggressive drilling program for
1997 with over $3.7 million in planned drilling activities along the Gulf Coast
Region. This includes a 15,000 foot test on the Company's Schooner Prospect in
Plaquemines Parish, Louisiana, a well in which it owns a 37% working interest
which Hunt Petroleum Corporation will operate. The Schooner Prospect is ready to
drill and is currently waiting on a drilling rig. Drilling operations are
expected to commence in June 1997. The Starboard Project is the most significant
project in the Company's history. Partners include Fina Oil and Chemical
Company, two affiliates of public utilities and a development drilling financing
commitment from Bank of America, Illinois. The Company owns working interests in
its leases over said project ranging from 12% to 48% depending upon the target
formation depths. The 3-D seismic has been shot and processed and interpretation
is under way. The project includes developmental and exploratory locations.
Initial drilling sites have been identified and developmental and exploratory
drilling is expected to commence in the third quarter of 1997.
In the first quarter of 1997, the Company participated in three dry holes
and one unsuccessful recompletion attempt on South Louisiana prospects, none of
which was confirmed by 3-D seismic. It also participated in a dry hole in Mobile
Bay on a high risk, high potential Oligocene feature. In April 1997 the Company
participated in a 7,500 foot test located in Terrebonne Parish, Louisiana. The
cost, net to the Company, for this dry hole was approximately $257,000. With the
exception of the Mobile Bay well, the Company has not yet drilled any of its
high potential prospects which include its Schooner Prospect and the exploratory
targets in the Starboard Project.
Three months ended March 31, 1997 compared with three months ended March 31,
1996
Revenue. Total revenues decreased 67.6% from $1,250,206 for the quarter
ended March 31, 1996, to $405,647 for the quarter ended March 31, 1997.
Total gas and oil revenues decreased 70.0% from $1,091,963 to $327,435. The
decrease in gas and oil revenues was primarily attributable to decreased
production from the Mobile Bay wells which came on stream in December of 1995
and from the sale of properties discussed below. Gas and oil revenues associated
with Mobile Bay declined from $554,514 for the quarter ended March 31, 1996
9
<PAGE>
compared to $32,326 for the quarter ended March 31, 1997. A contributing factor
to the decline in gas and oil revenues was the sale of the Company's N.E.
Cedardale field located in Major County, Oklahoma on September 27, 1996. The
Company recorded gas and oil revenues associated with the N.E. Cedardale field
of $206,453 for the quarter ended March 31, 1996.
Partially offsetting the decrease in gas and oil revenues during the first
quarter of 1997 was the increase in gain on sale of assets of $118,750 from
$13,285 reported in the first quarter of 1996 to $132,035 reported in the first
quarter of 1997. As a result of the sale of a substantial portion of the
Company's operated properties in 1996, operating fees to the Company decreased
from $73,010 in the first quarter of 1996 to $14,234 in the first quarter of
1997. Finally, the Company realized losses from various commodity transactions
totaling $121,937 in the first quarter of 1997. No similar transactions occurred
in the first quarter of 1996. Such losses for the first quarter of 1997 were
attributable to various transactions in which the Company hedged its future gas
delivery obligations as a requirement for its bank loan facility coupled with
the fact that spot gas prices were higher than the hedge contracts in the
quarter. In addition to the foregoing, the Company had other revenues of $53,880
in the first quarter of 1997 as compared to $71,948 in the first quarter of
1996.
Costs and Expenses. Total costs and expenses of the Company decreased 13.0%
from $2,019,432 in the first quarter of 1996 to $1,757,669 in the first quarter
of 1997. The decrease in costs and expenses was primarily attributable to a
combination of decreases in non-recurring deferred gas contract settlement costs
and gas purchases under deferred contracts, decreases in depletion, depreciation
and amortization and operating costs associated with oil and gas properties such
as lease operating expense, transportation, and production taxes. Partially
offsetting the foregoing decreases in expenses were increases in exploration
costs and general and administrative expense.
Cost of settling gas contracts and futures contracts attributable to the
settlement of a gas sales contract with Waldorf Corporation ($368,960) and the
gas purchases to fulfill the Waldorf contract ($82,461), occurred in the first
quarter of 1996. The Company incurred no similar costs in the first quarter of
1997.
Depletion, Depreciation, and Amortization Expense ("DD&A") decreased by
69.3% from $431,998 in the first quarter of 1996 to $132,774 for the first
quarter of 1997. The decrease in DD&A was primarily attributable to the sale of
the Company's N.E. Cedardale field located in Major County, Oklahoma on
September 27, 1996.
Interest expense decreased to $4,133 in the first quarter of 1997 from
$97,353 for the first quarter of 1996. The Bank of America loan was
substantially repaid in September 1996 from the proceeds of the sale from the
N.E. Cedardale properties.
Lease operating expense decreased 41.9% from $166,567 for the first quarter
of 1996 to $96,698 for the first quarter of 1997. The reduction in lease
operating costs was attributable to the sale of operated properties, including
the N.E. Cedardale field, and a decline in rework activity.
Production taxes declined 88.6% from $77,163 for the first quarter of 1996
to $8,784 for the first quarter of 1997 due to the sale of the N.E. Cedardale
properties and the significant decline in production from Mobile Bay.
Transportation and gathering costs decreased 29.9% from $128,873 for the
first quarter of 1996 compared to $90,394 for the first quarter of 1997. With
the substantial drop in production from the Mobile Bay wells, transportation
costs in connection with these wells are expected to decline substantially
during the remainder of 1997.
Exploration costs increased 707.9% from $105,542 for the first quarter of
1996 to $852,626 for the first quarter of 1997. The exploration costs reflect
the impairment of oil and gas leases and expensed investments, of which $778,207
are attributable to dry hole costs. Also included in exploration costs is
$74,419 of leasehold and acquisition costs.
10
<PAGE>
General administrative expenses ("G&A") increased by 2.1% from $560,515 for
the first quarter of 1996 compared to $572,260 in the first quarter of 1997.
Net Income (loss). The net loss increased from $769,226 to $1,352,022 for
the first quarter ended March 31, 1996 and March 31, 1997, respectively. This
increase was due to the factors discussed above.
The net loss per common share increased from a net loss of $0.16 per share
in the first quarter of 1996 to a net loss of $0.19 per share in the first
quarter of 1997. This is reflective of the increase in net loss of $582,796 from
the first quarter of 1996 as compared to the first quarter of 1997. The
increased net loss was partially offset by the increased number of weighted
average common equivalent shares at March 31, 1997 that resulted from the
secondary offering which was finalized on August 14, 1996. As a result of the
secondary offering there were approximately 7,142,000 weighted average common
equivalent shares at March 31, 1997 as compared to approximately 5,058,000
weighted average common equivalent shares at March 31, 1996.
Liquidity and Capital Resources
At March 31, 1997, the Company had a cash balance of $3,869,789 and working
capital of $2,785,080 as compared to a cash balance of $4,956,656 and working
capital of $4,096,160 at December 31, 1996. The decrease in cash and working
capital was primarily attributable to the operating loss incurred during the
quarter and, in particular, exploration costs associated with dry holes which
were drilled during the quarter.
Cash flows used in operations totaled $348,780, excluding $852,626 of
exploration costs which are classified under cash flows used in investing
activities.
Cash flows used in investing activities totaled $863,390. Included in the
cash flows used in investing activities are $1,330,312 of capital expenditures
on gas and oil properties, including the exploration costs referred to above
which are included in the operating loss for the period but are excluded from
operating cash flows. Partially offsetting the capital expenditures during the
quarter, the Company received $540,568 of proceeds from the sale of various oil
and gas properties during the quarter.
Cash flows from financing activities totaled $125,303 during the quarter.
Cash flows from financing activities consisted of proceeds from debt issuances
of $225,534 offset by repayments of long-term debt of $74,443 and preferred
stock dividends paid of $25,788.
The Company's principal obligations at March 31, 1997, were substantially
the same as at December 31, 1996, and consisted principally of (i) servicing
loans from Bank of America ($415,698 at March 31, 1997) and other loans, (ii) a
non-recourse loan relating to the development of the Company's Starboard
Prospect ($864,000 at March 31, 1997), (iii) payment of preferred stock
dividends ($25,788 of dividends were paid during the quarter and $25,788 of
dividends were declared and paid in April of 1997, subsequent to quarter end),
(iv) funding of the Company's proposed exploration activities during the second
half of 1997, and (v) funding of the day-to-day operating costs.
The Company has utilized, and expects to continue to utilize, its cash
balances to fund exploration costs and negative cash flows from operations. The
Company is presently in non-compliance with the terms of its loan from Bank of
America, but has secured a waiver of various covenants under the loan through
March 31, 1997. The Company anticipates that it will require additional waivers
of covenants under the Bank of America loan until such time as the Company
begins to receive revenues, if ever, from the drilling of wells scheduled for
drilling during the second and third quarters of 1997.
Pending the results of its second and third quarter drilling, the Company
may need additional funds beyond its capital and credit lines over the next
twelve months for operating or capital needs. In the event second and third
quarter drilling is unsuccessful, or it develops currently unknown prospects
and/or acquisition opportunities, it may seek additional exploration and/or
acquisition capital. Potential options available to the Company to raise any
additional funds include, but are not limited to, (a) additional outside
partners, (b) additional private borrowing, (c) the further sale of 3-D seismic
data (d) the exercise of the Company's currently outstanding warrants should
the Company's stock prices rise by August of 1997 to levels necessary to allow
said warrants to be called, and (e) additional equity capital.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Exhibits and Reports on Form 8-K.
(a) Exhibits
(11) Computation of Net Income Per Common and Common Equivalent Share
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
12
<PAGE>
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 of the
undersigned thereunto duly authorized.
FRONTIER NATURAL GAS CORPORATION
Date: May 15, 1997 By: /s/ DAVID W. BERRY
-------------- ------------------------------------
David W. Berry, Chief Executive
Officer (Principal Executive
Officer) and Director
Date: May 15, 1997 By: /s/ DAVID B. CHRISTOFFERSON
-------------- ------------------------------------
David B. Christofferson, Executive
Vice President, General Counsel,
Chief Financial Officer and
Director
Date: May 15, 1997 By: /s/ STEPHEN R. STABILE
-------------- ------------------------------------
Stephen R. Stabile,
Chief Accounting Officer
13
EXHIBIT 11 TO FORM 10-QSB
FRONTIER NATURAL GAS CORPORATION
Computation of Net Income Per Common and Common Equivalent Share
(Unaudited)
Quarter ended March 31,
-----------------------------
1997 1996
----------- ------------
Common shares issued and
outstanding, beginning 7,142,056 5,058,406
Add: Common stock issued ---- ----
=========== ===========
Total equivalent common shares 7,142,056 5,058,406
=========== ===========
Net income (loss) $(1,352,022) $ (769,226)
Less: Cumulative preferred
stock dividend 25,788 25,788
----------- -----------
Net loss available to common
and common equivalent shares $(1,377,810) $ (795,014)
=========== ===========
Net loss per common and common
equivalent share $ (0.19) $ (0.16)
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,869,789
<SECURITIES> 0
<RECEIVABLES> 330,667
<ALLOWANCES> 10,533
<INVENTORY> 0
<CURRENT-ASSETS> 4,505,732
<PP&E> 6,617,701
<DEPRECIATION> (2,923,690)
<TOTAL-ASSETS> 8,420,323
<CURRENT-LIABILITIES> 1,720,652
<BONDS> 228,417
0
860
<COMMON> 98,659
<OTHER-SE> 5,268,287
<TOTAL-LIABILITY-AND-EQUITY> 8,420,323
<SALES> 327,435
<TOTAL-REVENUES> 405,647
<CGS> 0
<TOTAL-COSTS> 1,757,669
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,133
<INCOME-PRETAX> (1,352,022)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,352,022)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,352,022)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
