U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission File No. 0-25386
FX ENERGY, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 87-0504461
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3006 Highland Drive, Suite 206
Salt Lake City, Utah 84106
(Address of principal executive offices)
(801) 486-5555
(Issuer's telephone number)
FRONTIER OIL EXPLORATION COMPANY
(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
State the number of shares outstanding of each of the issuer's class of common
equity, as of the latest practicable date: 11,730,096 shares of $.001 par value
common stock outstanding as of August 9, 1996.
Transitional Small Business Disclosure Format: Yes No X
FX ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 891,504
Certificate of deposit - restricted 300,000
Accounts receivable:
Accrued oil sales 262,402
Due from joint interest owners 471,542
Inventory 18,241
Other current assets 107,371
----------
Total current assets 2,051,060
----------
Property and equipment, at cost:
Oil and gas properties (successful efforts method):
Proved 6,317,583
Unproved 1,498,763
Other property and equipment 1,785,518
----------
9,601,864
Less accumulated depreciation, depletion and
amortization (1,120,653)
----------
Net property and equipment 8,481,211
----------
Other assets:
Certificates of deposit 217,400
Deferred offering costs 217,000
Other 2,124
------------
Total other assets 436,524
------------
TOTAL ASSETS $ 10,968,795
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 686,446
Accounts payable - related parties 35,934
Accrued liabilities 437,777
Current portion of long-term debt 27,556
------------
Total current liabilities 1,187,713
------------
Long-term debt 3,582,594
------------
Total liabilities 4,770,307
------------
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, 17,500 shares issued and outstanding,
$17,500 liquidation preference 18
Common stock, $.001 par value, 20,000,000 shares
authorized, 8,704,596 shares issued and outstanding 8,705
Additional paid-in capital 11,514,147
Accumulated deficit (5,324,382)
------------
Total stockholders' equity 6,198,488
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,968,795
============
The accompanying notes are an integral part
of the consolidated financial statements.
FX ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For three months For six Months
ended June 30, ended June 30,
1996 1995 1996 1995
Revenues:
Oil sales $ 572,175 $ 504,474 $ 1,077,108 $ 1,020,268
Drilling revenue 7,250 30,513 7,725 35,262
Prospect sales 0 15,000 0 75,000
---------- ----------- ----------- -----------
Total revenues 579,425 549,987 1,084,833 1,130,530
---------- ----------- ----------- -----------
Operating costs and expenses:
Production and
operating expenses 255,253 256,511 548,496 521,260
Production taxes 43,025 84,758 74,973 157,939
Exploration costs 205,509 158,839 394,369 252,775
Drilling costs 1,766 50,685 26,036 62,308
Depreciation, depletion
and amortization 137,206 137,376 275,492 243,537
Leasehold abandonments 0 33,633 0 33,633
General and
administrative 360,003 203,579 725,862 479,556
---------- ----------- ----------- -----------
Total operating costs
and expenses 1,002,762 925,381 2,045,228 1,751,008
---------- ----------- ----------- -----------
Operating loss (423,337) (375,394) (960,395) (620,478)
---------- ----------- ----------- -----------
Other income (expense):
Interest and other
income 21,179 36,488 56,819 46,710
Interest expense (89,554) (124,160) (171,073) (234,955)
Minority interest:
Non-cash dividends
on FX Producing
convertible preferred
stock 0 (21,319) 0 (76,005)
---------- ----------- ----------- -----------
Total other income
(expense) (68,375) (108,991) (114,254) (264,250)
---------- ----------- ----------- -----------
Net loss $ (491,712) $ (484,385) $ (1,074,649) $(884,728)
========== =========== =========== ===========
Net loss per common
share $(0.06) $(0.09) $(0.13) $(0.22)
========== =========== =========== ===========
Weighted average
number of shares
outstanding 8,613,177 5,239,214 8,353,524 4,018,895
========== =========== =========== ===========
The accompanying notes are an integral part
of the consolidated financial statements.
FX ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For six months ended June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,074,649) $ (884,728)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation, depletion and amortization 275,492 243,537
Leasehold abandonments 0 33,633
Gain on sale of equipment 0 (15,991)
Minority interest: Non-cash dividends
on FX Producing convertible
preferred stock 0 76,005
Common stock and options issued
for services 147,750 10,000
Increase (decrease) from changes in:
Accounts receivable (347,780) 5,016
Inventory (2,290) 1,276
Other current assets (75,277) 4,842
Accounts payable and
accrued liabilities (118,070) 512,331
----------- ----------
Net cash used in
operating activities (1,194,824) (14,079)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (300,074) (433,165)
Additions to other property and
equipment (154,655) (11,002)
Additions to other assets 0 (70,839)
Proceeds from sale of interest
in unproved properties 350,000 0
Proceeds from sale of equipment 9,700 18,000
Purchase of certificate of deposit (300,000) 0
----------- ----------
Net cash used in
investing activities (395,029) (497,006)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (91,992) (163,887)
Proceeds from issuance of FX
Producing convertible
preferred stock 0 111,000
Redemption of redeemable FX Producing
preferred stock 0 (464,666)
Deferred offering costs (69,142) 0
Proceeds from issuance of common
stock and exercise of warrants,
net of offering costs 1,898,770 1,288,083
----------- ----------
Net cash provided by
financing activities 1,737,636 770,530
----------- ----------
INCREASE IN CASH
AND CASH EQUIVALENTS 147,783 259,445
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 743,721 288,872
----------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 891,504 $ 548,317
============ ===========
The accompanying notes are an integral part
of the consolidated financial statements.
FX ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The interim financial data are unaudited; however, in the opinion of the
management of FX Energy, Inc. ( formerly Frontier Oil Exploration Company) and
Subsidiaries ("FX Energy" or the "Company"), the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results for the interim periods. The financial statements
should be read in conjunction with FX Energy's annual report on Form 10-KSB for
the year ended December 31, 1995 and quarterly report on Form 10-QSB for the
three months ended March 31, 1996.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated in consolidation. At June 30, 1996, the
Company owned 100% of the voting stock of its subsidiaries, including FX
Producing Company, Inc. ("FX Producing").
NOTE 2: CASH-RESTRICTED
In accordance with an amendment to the Company's bank loan agreement in the
first quarter of 1996, the Company was required to purchase a certificate of
deposit in the amount of $300,000 in lieu of making normal principal reduction
payments of $25,000 per month for the period of March 1 to September 30, 1996.
The certificate of deposit was purchased in April 1996 and matures on November
1, 1996. The certificate of deposit is pledged through its maturity date of
November 1, 1996 as collateral to the bank note.
NOTE 3: INCOME TAXES
The Company recognized no income tax benefit from the losses generated in
1996 and 1995.
NOTE 4: COMMON STOCK
During the six months ended June 30, 1996, the Company sold 359,893 shares
of common stock at $3.00 per share and 156,111 shares of common stock at $4.50
per share resulting in net proceeds to the Company of $1,727,364. During the
same period 102,004 warrants were exercised resulting in proceeds to the
Company of $146,407.
During the six months ended June 30,1996, the following transactions in the
Company's common stock also occurred:
- sold 12,500 shares of common stock for $25,000 in January 1996
- holders of preferred stock converted 120,000 shares into 120,000 shares
of common stock
- issued 54,000 shares valued at $147,750 for services rendered (primarily
in the first quarter)
- issued 1,093 shares valued at $2,186 in exchange for an interest in oil
properties in January 1996
In connection with the purchase of the Company's producing oil properties
and well servicing equipment in 1994, the Company agreed to issue to the former
owners up to 400,000 shares of Company common stock in semi-annual increments
of 50,000 shares each beginning October 1, 1994 on the attainment of certain
levels of oil production from the properties acquired. Production levels as of
June 30, 1996 had not been reached. Accordingly, the number of shares that may
be issued in the future has been reduced to 200,000 shares.
NOTE 5: LONG-TERM DEBT
The Company's bank loan agreement was amended in 1996. As part of that
amendment, principal reductions of $25,000 per month were suspended for the
period from March 1 through September 30, 1996. On May 13, 1996, the bank
amended the loan agreement to extend the maturity date of the note to October 1,
1997.
NOTE 6: AGREEMENT WITH RWE-DEA
On May 3, 1996, the Company entered into an agreement with RWE-DEA
Aktiengesellschaft fur Mineraloel und Chemie, Hamburg, Germany ("RWE-DEA"),
which provides for joint operations on the Company's approximately 2.4 million
acre on-shore Baltic Platform concession area in northern Poland. This
agreement grants to RWE-DEA the right to earn 50% interest in the concession
area by paying the Company $250,000 in cash (which was recorded as a recovery of
capitalized costs), paying up to $2,000,000 for a seismic survey now nearing
completion on the Gladysze and three other structures within the concession area
and the cost of an exploratory well scheduled for the last half of 1996 at a
location to be designated by RWE-DEA and by funding 50% of the cost of a second
exploratory well. Should the costs of the planned seismic or drilling of the
first exploratory well in 1996 exceed the amounts RWE-DEA is obligated to pay,
the Company will be required to pay 50% of the excess. The Company is
designated as the operator of all joint operations. The Company has agreed to
pay an unaffiliated party a fee of approximately $125,000 (contingent upon RWE-
DEA payments discussed above) for assisting the Company in its search for an
international joint venture partner.
NOTE 7: SUBSEQUENT EVENTS
On August 2, 1996, the Company completed the issuance of an additional 3.0
million shares of common stock through a public offering, resulting in net
proceeds (after deducting issuance costs of approximately $1,800,000) of
approximately $15,450,000. As of June 30, 1996 the Company had capitalized
deferred offering costs of $217,000. On August 7, 1996, the Company used
proceeds from the public offering to pay off its bank debt in the amount of
$3,565,000. As a result, the entire principal balance at June 30, 1996 has been
classified as long-term. The Company will maintain its borrowing agreement with
the bank, which has a borrowing base of $3,580,000 as of June 30, 1996.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS AND
PLAN OF OPERATIONS
FINANCIAL CONDITION
Working Capital
The Company had working capital of $863,347 at June 30, 1996. For the
six months ended June 30, 1996, net cash of $1,194,824 was used for operating
activities compared to $14,079 in the same period of 1995. The increase in 1996
was due primarily to an increase in the net loss, an increase in accounts
receivable from the Company's joint working interest owner in the Poland
concession and a decrease in accounts payable and accrued liabilities.
Investing Activities
During the first six months of 1996, the Company expended $454,729 on
additions to oil and gas properties and other property and equipment as compared
to $444,167 in the same period of 1995. Of the total additions, the Company's
principal expenditures were $252,713 on its Montana oil properties and $154,655
on other property and equipment as compared to $372,007 on its Montana oil
properties and $11,002 on other property and equipment in the same period of
1995. The decreased expenditures on its Montana properties are a result of the
completion of the first phase of in-fill drilling which began in early 1995 and
was substantially completed in January 1996. The 1995 development work has
performed to expectations on production tests in the first half of 1996.
Accordingly, the Company has begun upgrading the injection system throughout
approximately half of the Company's 10,000 acres, as the first step in an
expanded in-fill drilling program that will run through the end of 1997.
Expenditures relating to leasehold acquisition costs were $47,361 and
$61,158 in the first six months of 1996 and 1995 respectively, Of the total
additions, expenditures in Poland were $44,000 in the first six months of 1996
as compared to $57,000 in the same period of 1995. The decrease relates to the
change in the Company's operations in its Baltic platform concession as it moves
from concession acquisition to seismic acquisition and evaluation.
During the first six months of 1996, the Company sold an interest in
unproved property in Nevada for $100,000 which was recorded as a recovery of
capitalized costs.
On May 3, 1996, the Company entered into an agreement with RWE-DEA
Aktiengesellschaft fur Mineraloel und Chemie, Hamburg, Germany ("RWE-DEA"),
which provides for joint operations on the Company's approximately 2.4 million
acre on-shore Baltic Platform concession area in northern Poland. This
agreement grants to RWE-DEA the right to earn 50% interest in the concession
area by paying the Company $250,000 in cash (which was recorded as a recovery of
capitalized costs), paying up to $2,000,000 for a seismic survey now nearing
completion on the Gladysze and three other structures within the concession area
and the cost of an exploratory well scheduled for the last half of 1996 at a
location to be designated by RWE-DEA and funding 50% of the cost of a second
exploratory well. Should the costs of the planned seismic or drilling of the
first exploratory well in 1996 exceed the amounts RWE-DEA is obligated to pay,
the Company will be required to pay 50% of the excess. The Company is
designated as the operator of all joint operations. The Company has agreed to
pay an unaffiliated part a fee of approximately $125,000 (contingent upon RWE-
DEA payments discussed above) for assisting the Company in its search for an
international joint venture partner.
The Company initiated pre-drilling seismic work in the second quarter of
1996 on its on-shore Baltic Platform concession in Poland and believes that the
planned seismic work will be completed in time to initiate test drilling during
1996.
In May 1996, the Company entered into a joint study agreement with the
Polish Oil and Gas Company (POGC) to reprocess and reinterpret geological and
geophysical data collected from a 6.25 million acre area in the Carpathian
region of southeastern Poland. The Company is currently evaluating data
available from the joint study area and upon completion of this review the
Company will determine the nature of future activities in this joint study area.
If warranted, the Company plans to submit with POGC an application with the
appropriate Polish authorities for exploration rights or concessions over
designated portions of the study area.
The Company plans to drill an exploratory well on its Cobb Creek property
in Nevada during the fourth quarter of 1996 using its drilling rig afterwhich
the drilling rig will be used in the Company's Montana operations. Additional
exploration in the U.S. Rocky Mountain area will be pursued as prospects are
identified and industry drilling groups are formed.
Unproved oil and gas properties consists of property acquisition costs
totaling $1,498,763 attributable to various individual exploration prospects.
The Company's capitalized costs of unproved properties are concentrated in two
main prospects, namely, Lake Valley and Poland. In accordance with generally
accepted accounting principles, should the Company determine that prospects'
capitalized costs are not recoverable following unsuccessful exploration
drilling or otherwise, the Company would record an impairment charge which may
materially and adversely affect the Company's results of operations for the
period during which such impairment is recognized.
Financing Activities
During the first six months of 1996, the Company sold 528,504 shares of
common stock resulting in net proceeds to the Company of $1,752,364. During the
same period 102,004 warrants were exercised resulting in proceeds to the Company
of $146,407. In the first six months of 1995, the Company received $1,288,083
in net proceeds from the sale of 720,000 shares of common stock and $111,000
from the issuance of FX Producing convertible preferred stock. During the
first six months of 1995 the Company redeemed $464,666 of redeemable FX
Producing preferred stock. During the first six months of 1996 and 1995, the
Company repaid $91,992 and $163,887 of long-term debt.
In August 1996, the Company completed the issuance of an additional 3.0
million shares of common stock through a public offering, resulting in net
proceeds (after deducting issuance costs of approximately $1,800,000) of
approximately $15,450,000. As of June 30, 1996 the Company had capitalized
deferred offering costs of $217,000 of which $69,142 had been paid. On August
7, 1996, the Company used proceeds from the public offering to pay off its bank
debt in the amount of $3,565,000. The Company will maintain its borrowing
agreement with the bank, which has a borrowing base of $3,580,000 as of June
30, 1996. The remainder of the net proceeds from the offering, together with
cash available under the Company's continuing bank credit facility and
potentially available from operations, will be used to fund the Company's 1996
and 1997 capital expenditure budget of $15,300,000 and for general corporate
purposes. The Company's planned capital expenditures through December 31, 1997,
are as follows: (I) approximately $7,000,000 for exploration and potential
development activities related to the Baltic Concession, (ii) approximately
$1,400,000 for the review and evaluation of available geological and geophysical
data and the potential initiation of exploratory activities in the Carpathian
joint study area, (iii) approximately $6,100,000 for in-fill development
drilling in the Cut Bank field in Montana and (iv) approximately $800,000 for
exploration activities in the western United States. The allocation of the
Company's capital among the categories of anticipated expenditures is
discretionary and will depend upon future events that cannot be predicted. Such
events include the actual results and costs of future exploration and
development drilling activities. Consistent with previous practice, the Company
may obtain partial funding for its exploration and potential development
activities through strategic arrangements with industry or financial partners.
RESULTS OF OPERATIONS
Comparison of Second Quarter 1996 to Second Quarter 1995
Oil sales increased 13% in the second quarter of 1996 to $572,175 as
compared to $504,474 in the same quarter of 1995. The increase was due to an
average increase of approximately $2.23 per barrel in the price of oil sold
during the second quarter of 1996 as compared to the second quarter of 1995.
The increase in price was offset by a decrease in production of 1,361 barrels to
32,520 for the second quarter of 1996, compared to 33,881 for the same quarter
in 1995.
Drilling revenues decreased $23,263 in the second quarter of 1996 to $7,250
as compared to $30,513 in the period of 1995. In June 1995 the Company had
begun drilling an exploratory well with its drilling rig resulting in income
from partners in the well. The Company has not drilled any exploratory wells
with its drilling rig during 1996. Drilling revenue will vary with the timing
of wells being drilled, cost of the well and the Company's working interest.
In the second quarter of 1995 the Company sold an interest in undeveloped
acreage and recognized revenue from prospect sales of $15,000. During the
second quarter of 1996, the Company received $250,000 from its partner in the
Poland concession, but the proceeds were treated as a recovery of costs in the
overall project and accordingly no revenues were recorded.
Production and operating expenses in the second quarter of 1996 were
comparable to same period in 1995.
Production taxes decreased $41,733 to $43,025 in the second quarter of 1996
as compared to $84,758 in the same quarter of 1995. The decrease was primarily
due to an exemption, effective July 1, 1995, for certain stripper well
production affecting most of the Company's Montana production. Effective
January 1, 1996, another production tax of approximately 5.5% was eliminated on
most of the Company's Montana production. These production taxes are not
expected to be reinstated in the future.
Exploration costs increased $46,670 in the second quarter of 1996 to
$205,509 as compared to $158,839 in the same period of 1995. The increase is
primarily due to the Company's continuing exploration program in Poland.
Drilling costs decreased $48,919 to $1,766 in the second quarter of 1996 as
compared to $50,685 in the same quarter of 1995. The costs incurred in the
second quarter of 1995 were related to the drilling of an exploratory well.
Depreciation, depletion, and amortization was approximately $137,000 in the
second quarters of 1996 and 1995. The effect of the decrease in production in
the second quarter of 1996 was offset by increased capitalized oil and gas
property costs and a reduction of total proved reserves used to calculate
depreciation, depletion, and amortization for the quarter ended June 30, 1996,
as compared to the same period of 1995.
There were no leasehold abandonments in the second quarter of 1996 as
compared to $33,633 in the second quarter of 1995. Leasehold abandonments will
vary from quarter to quarter and year to year based upon management's periodic
assessment to determine whether the unproved properties have been impaired.
General and administrative expenses were $360,003 in the second quarter of
1996 as compared to $203,579 in the same quarter of 1995, an increase of
$156,424. The increase is due to additional administrative requirements of the
Company in 1996 related to the Company's expanded exploration and development
activities and the additional reporting requirements since the Company went
public in 1995.
Interest and other income decreased to $21,179 in the second quarter of
1996 as compared to $36,488 for the same quarter of 1995. The decrease is due
to a gain on the sale of equipment in the second quarter of 1995 for which there
was no comparable sale in 1996.
Interest expense decreased $34,606 to $89,554 for the quarter ended June
30, 1996 as compared to $124,160 for the quarter ended June 30, 1995. The
decrease is primarily due to a reduction in the average outstanding balance of
the Company's long-term debt in the second quarter of 1996 as compared to the
same quarter in 1995.
During the quarter ended June 30, 1995 the Company paid non-cash (stock)
dividends of $21,319 on preferred stock of its oil-producing subsidiary, FX
Producing. All preferred shares of FX Producing had been converted into common
shares of the Company as of December 31, 1995 and accordingly there was no
dividend payment on the preferred stock in 1996 nor will there be in the future.
Comparison of First Six Months of 1996 with the First Six Months of 1995
Oil sales increased 6% in the first six months of 1996 to $1,077,108 as
compared to $1,020,268 in the same period of 1995. The increase was due to an
average increase of approximately $1.80 per barrel in the price of oil sold
during the first six months of 1996 as compared to the first six months of 1995.
The increase in price was partially offset by a decrease in production of 3,989
barrels to 64,118 for the first six months of 1996 compared to 68,107 for the
same period in 1995.
Drilling revenues decreased $27,537 in the first six months of 1996 to
$7,725 as compared to $35,262 in the same period of 1995. In June 1995 the
Company had begun drilling an exploratory well with its drilling rig resulting
in income from partners in the well. The Company did not drill any exploratory
wells during the first half of 1996. Drilling revenue will vary with the timing
of wells being drilled, cost of the well, and the Company's working interest.
In the first six months of 1995 the Company sold an interest in undeveloped
acreage and recognized revenue from prospect sales of $75,000 related to the
sale. During the first six months of 1996, the Company received $250,000 from
its partner in the Poland concession and $100,000 from the sale of an interest
in undeveloped acreage in Nevada. However, proceeds from both transactions
were treated as a recovery of costs in the overall projects and accordingly no
revenues were recorded.
Production and operating expenses in the first six months of 1996 increased
$27,236 to $548,496 as compared to $521,260 in the comparable period in 1995.
The increase was primarily incurred in the first quarter of 1996 and related to
a continuation of concerted efforts to perform increased maintenance on the
Southwest Cut Bank Unit in conjunction with the Company's overall plan to
enhance production of the field.
Production taxes decreased $82,966 to $74,973 in the first six months of
1996 as compared to $157, 939 in the first six months of 1995. The decrease was
primarily due to an exemption, effective July 1, 1995, for certain stripper well
production affecting most of the Company's Montana production. Effective
January 1, 1996, another production tax of approximately 5.5% was eliminated on
most of the Company's Montana production. These production taxes are not
expected to be reinstated in the future.
Exploration costs increased $141,594 in the first six months of 1996 to
$394,369 as compared to $252,775 in the same period of 1995. The increase is
primarily due to the Company's ongoing exploration program in Poland.
Drilling costs decreased $36,272 to $26,036 in the first six months of 1996
as compared to $62,308 in the first six months of 1995. The costs incurred in
the first six months of 1995 were related to the drilling of an exploratory well
which began in the second quarter of 1995. There were no comparable expenses
incurred in the first six months of 1996.
Depreciation, depletion, and amortization increased $31,955 to $275,492 in
the first six months of 1996 as compared to $243,537 in the same period of 1995.
The increase is primarily due to an increase in capitalized oil property costs
as of June 30, 1996 as compared to June 30, 1995 and a reduction of total proved
reserves used to calculate depreciation, depletion, and amortization for the six
months ended June 30, 1996 as compared to the same period of 1995.
There were no leasehold abandonments in the first six months of 1996 as
compared to $33,633 in the first six months of 1995. Leasehold abandonments
will vary from quarter to quarter and year to year based upon management's
periodic assessment to determine whether the unproved properties have been
impaired.
General and administrative expenses were $752,862 in the first six months
of 1996 as compared to $479,556 in the same period of 1995, an increase of
$273,306. The increase is due to additional administrative requirements of the
Company in 1996 related to the Company's expanded exploration and development
activities and the additional reporting requirements since the Company went
public in 1995.
Interest and other income increased to $56,819 in the six months ended June
30, 1996 as compared to $46,710 in the same period of 1995. The increase is
primarily due to an increase in average cash on hand during the first half of
1996.
Interest expense decreased $63,882 to $171,073 for the first six months of
1996 as compared to $234,955 for the same period of 1995. The decrease is
primarily due to a reduction in the average outstanding balance of the Company's
long term debt in the six months ended June 30, 1996 as compared to the same
period of 1995.
During the six months ended June 30, 1995 the Company paid non-cash (stock)
dividends of $76,005 on preferred stock on its oil-producing subsidiary, FX
Producing. All preferred shares of FX Producing had been converted into common
shares of the Company as of December 31, 1995 and accordingly there was no
dividend payment on the preferred stock in 1996 nor will there be in the future.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 22, 1996, at the annual meeting of the Company's shareholders, the
shareholders approved the following matters submitted to them for consideration:
(1) Elected David N. Pierce, Andrew W. Pierce, Scott J. Duncan, Thomas B.
Lovejoy, and Peter L. Raven as directors of the Company as follows:
David N. Pierce For: 7,412,408
Andrew W. Pierce For: 7,412,408
Scott J. Duncan For: 7,412,408
Thomas B. Lovejoy For: 7,412,408
Peter L. Raven For: 7,412,408
(2) Approved amendment of the Company's Articles of Incorporation to change its
corporate name from "Frontier Oil Exploration Company" to "FX Energy,
Inc.":
For: 7,421,408 Against: 250 Abstentions and non-votes: 1,282,938
(3) Approved the Frontier Oil Exploration Company 1995 Stock Option and Award
Plan:
For: 4,191,206 Against: 18,425 Abstentions and non-votes: 4,494,965
ITEM 6, EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
The following exhibits are included as part of this report:
SEC
EXHIBIT REFERENCE
NUMBER NUMBER TITLE OF DOCUMENT LOCATION
10.01 10 Agreement dated April 16, 1996, between Incorporated
Frontier Poland Exploration and Producing by
Company Sp. Z o o. and RWE-DEA Reference(1)
Aktiengesellschaft fur Mineraloel und
Chemie, including exhibits, relating to
Poland Concession
10.02 10 Joint Study Agreement dated May 21, 1996, Incorporated
between FX Energy (Frontier Oil by
Exploration Company) and the Polish Oil Reference(2)
and Gas Company, including appendix,
relating to joint study of area of
interest.
10.03 10 Amendments to Employment Agreements Incorporated
between Frontier Oil Exploration Company by
and each of David Pierce and Andrew Reference(3)
Pierce, effective May 30, 1996 *
10.04 10 Employment Agreement between Frontier Oil Incorporated
Exploration Company and Jerzey M. by
Maciolek Reference(3)
10.05 10 Amendment No. 3 to Loan Agreement dated Incorporated
June 7, 1994, by and between FX by
Producing, Inc., and Bank One, Texas, Reference(3)
N.A.
10.06 10 Joint Operating Agreement dated effective Incorporated
April 16, 1996, between Frontier Poland by
Exploration and Producing Company Sp. Z o Reference(3)
o. and RWE-DEA Aktiengesellschaft fur
Mineraloel und Chemie
(1)Incorporated by reference from the current report on Form 8-K dated May 3,
1996.
(2)Incorporated by reference from the current report on Form 8-K dated May 21,
1996.
(3) Incorporated by reference from the registration statement on form S-1, SEC
File No. 333-05583.
*IDENTIFIES EACH MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT
REQUIRED TO BE FILED AS AN EXHIBIT.
(B) REPORTS ON FORM 8-K.
During the quarter ended June 30, 1996, the Company filed the following
reports on Form 8-K
Date of Event Reported Item Reported
May 3, 1996 Item 5. Other Events
May 21, 1996 Item 5. Other Events
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FX ENERGY, INC.
(Registrant)
Date: August 12, 1996 By /s/ David N. Pierce
Chief Executive Officer, President, Chief
Financial and Accounting Officer, and Director
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1996, AND STATEMENTS OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 891,504
<SECURITIES> 300,000
<RECEIVABLES> 733,944
<ALLOWANCES> 0
<INVENTORY> 18,241
<CURRENT-ASSETS> 2,051,060
<PP&E> 9,601,864
<DEPRECIATION> 1,120,653
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<COMMON> 8,705
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<OTHER-SE> 6,189,765
<TOTAL-LIABILITY-AND-EQUITY> 10,968,795
<SALES> 1,077,108
<TOTAL-REVENUES> 1,084,833
<CGS> 0
<TOTAL-COSTS> 2,045,228
<OTHER-EXPENSES> (56,819)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171,073
<INCOME-PRETAX> (1,074,649)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,074,649)
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