U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Commission File No. 0-25386
FX ENERGY, INC.
(Exact name of registrant 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)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 of 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
The number of shares of $.001 par value common stock outstanding as of November
5, 1999 was 14,849,003.
FX ENERGY, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
Item Description Page
Part I. Financial Information
1. Consolidated Balance Sheets 3
1. Consolidated Statements of Operations 5
1. Consolidated Statements of Cash Flows 6
1. Notes to Consolidated Financial Statements 7
2. Management's Discussion and Analysis of
Financial Condition and Results of 10
Operations
Part II. Other Information
6. Exhibits and Reports on Form 8-K 25
-- Signatures 25
PART I.
ITEM 1. FINANCIAL STATEMENTS
FX ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September December
30, 1999 31, 1998
-------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,662,796 $ 1,811,780
Investment in marketable debt securities 5,911,625 2,929,914
Accounts receivable:
Accrued oil sales 225,919 95,064
Interest receivable 134,475 86,258
Joint interest owners and others 140,297 240,102
Advances to oil and gas ventures 52,414 --
Inventory 66,812 68,327
Other current assets 151,017 66,053
-------------- ------------
Total current assets 8,345,355 5,297,498
-------------- ------------
Property and equipment, at cost:
Oil and gas properties (successful efforts
method):
Proved 1,682,788 1,605,279
Unproved 1,616,485 1,178,408
Other property and equipment 2,591,680 2,494,688
-------------- ------------
Gross property and equipment 5,890,953 5,278,375
Less accumulated depreciation, depletion and
amortization (3,048,183) (2,679,441)
-------------- ------------
Net property and equipment 2,842,770 2,598,934
-------------- ------------
Other assets:
Certificates of deposit 356,500 356,500
Other 2,789 --
-------------- ------------
Total other assets 359,289 356,500
-------------- ------------
Total assets $ 11,547,414 $ 8,252,932
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 376,578 $ 420,906
Accrued liabilities 464,058 911,950
-------------- ------------
Total current liabilities 840,636 1,332,856
-------------- ------------
Stockholders' equity:
Common stock, $.001 par value, 30,000,000
shares authorized, 14,849,003 and
13,054,503 issued and outstanding as of
September 30, 1999 and December 31,
1998, respectively 14,849 13,055
Notes and interest receivable from officers (2,000,456) (1,304,527)
Additional paid-in capital 38,177,870 31,112,861
Accumulated deficit (25,485,485) (22,901,313)
-------------- ------------
Total stockholders' equity 10,706,778 6,920,076
-------------- ------------
Total liabilities and stockholders' equity $ 11,547,414 $ 8,252,932
============== ============
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
FX ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months For the nine months ended
ended September 30, September 30,
--------------------- -------------------------
1999 1998 1999 1998
--------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Oil sales $ 451,917 $ 275,523 $ 1,045,669 $ 879,668
Contract drilling and well
servicing 410,540 150,065 589,337 150,065
Gain on sale of property
interests -- -- -- 466,891
---------- --------- ---------- ----------
Total revenues 862,457 425,588 1,635,006 1,496,624
---------- --------- ----------- -----------
Operating costs and expenses:
Lease operating expenses 216,822 231,114 631,459 727,990
Production taxes 12,031 16,644 50,722 58,092
Geological and geophysical
costs 364,145 232,504 704,971 1,120,406
Exploratory dry hole costs 580,000 (3,421) 612,859 8,903
Impairments -- 5,639,645 -- 5,639,645
Contract drilling and well
servicing costs 249,311 114,170 382,697 135,282
Depreciation, depletion and 116,353 180,897 368,742 537,028
amortization
General and administrative 551,430 524,955 1,830,377 1,948,850
---------- ---------- ---------- -----------
Total operating costs and
expense 2,090,092 6,936,508 4,581,827 10,176,196
---------- ---------- ---------- -----------
Operating loss (1,227,635) (6,510,920) (2,946,821) (8,679,572)
---------- ---------- ---------- ----------
Other income (expense):
Interest and other income 155,215 118,552 362,649 414,737
---------- -------- ---------- -----------
Total other income 155,215 118,552 362,649 414,737
---------- -------- ---------- -----------
Net loss $(1,072,420) $(6,392,368) $(2,584,172) $(8,264,835)
=========== =========== =========== ===========
Basic and diluted net loss per
common share $ (0.08) $ (0.49) $ (0.18) $ (.64)
=========== =========== =========== ===========
Basic and diluted weighted
average number of shares
outstanding 14,847,916 13,034,449 13,979,582 12,954,439
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
FX ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended
September 30,
----------------------------
1999 1998
Cash flows from operating activities:
Net loss $ (2,584,172) $ (8,264,835)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation, depletion and amortization 368,742 537,028
Gain on sale of property interests -- (466,891)
Impairments -- 5,639,645
Exploratory dry hole costs 128,922 --
Common stock issued for services -- 119,375
Interest on officer loans (98,366) (37,646)
Increase (decrease) from changes in:
Accounts receivable (99,587) 363,587
Advances to oil and gas ventures (52,414) --
Inventory 1,515 2,286
Other current assets (84,964) (5,591)
Accounts payable and accrued liabilities (752,642) (250,367)
------------- ------------
Net cash used in operating activities (3,172,966) (2,363,409)
------------- ------------
Cash flows from investing activities:
Additions to oil and gas properties (390,086) (170,686)
Additions to other property and equipment (76,672) (237,115)
Additions to other assets (2,789) (144,695)
Proceeds from sale of property interests 6,000 505,000
Proceeds from sale of other property and
equipment -- 3,267
Purchase of marketable debt securities (6,138,711) (5,790,791)
Proceeds from maturing marketable debt
securities 3,157,000 5,950,000
------------- ------------
Net cash provided by (used in) investing
activities (3,445,258) 114,980
------------- ------------
Cash flows from financing activities:
Advances to officers (597,563) (869,080)
Proceeds from sale of common stock (net of
offering costs) 7,053,553 --
Proceeds from exercise of warrants and
options 13,250 160,251
------------- ------------
Net cash provided by (used in) financing
activities 6,469,240 (708,829)
------------- ------------
Increase (decrease) in cash and cash equiavlents (148,984) (2,957,258)
Cash and cash equivalents at beginning of
period 1,811,780 4,511,919
------------- ------------
Cash and cash equivalents at end of period $ 1,662,796 $ 1,554,661
============= ============
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. and Subsidiaries ("FX Energy" or the "Company"),
the interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods. The interim financial statements should be read in conjunction with FX
Energy's quarterly report on Form 10-Q for the three months ended March 31,
1999, the quarterly report on Form 10-Q for the six months ended June 30, 1999
and the annual report on Form 10-K for the year ended December 31, 1998,
including the financial statements and notes thereto.
The consolidated financial statements include the accounts of FX Energy,
its wholly-owned subsidiaries and FX Energy's undivided interests in Poland and
the United States. All significant inter-company accounts and transactions have
been eliminated in consolidation. At September 30, 1999, FX Energy owned 100%
of the voting stock of all of its subsidiaries.
FX Energy follows the successful efforts method of accounting for its oil
and gas operations. Under this method of accounting, all property acquisition
costs and costs of exploratory and development wells are capitalized when
incurred, pending determination of whether an individual well has found proved
reserves. If it is determined that an exploratory well has not found proved
reserves, the costs of drilling the well are expensed. The costs of development
wells are capitalized whether productive or nonproductive.
Certain balances in the 1998 financial statements have been reclassified to
conform to the current quarter presentation. These changes had no effect on
total assets, total liabilities, stockholders' equity or net loss.
Note 2: Income Taxes
FX Energy recognized no income tax benefit from the losses generated in the
first nine months of 1999 and the first nine months of 1998.
Note 3: Business Segments
FX Energy operates within two segments of the oil and gas industry: the
exploration and production segment ("E&P") and the contract drilling and well
servicing segment ("contract services"). Mining, which consists of gold
exploration on FX Energy's Sudety Project Area in Poland, is immaterial to FX
Energy and is not considered to be a reportable business segment by FX Energy.
Identifiable net property and equipment are reported by business segment for
management reporting and reportable business segment disclosure purposes.
Current assets, current liabilities and other assets are not allocated to
business segments for management reporting or business segment disclosure
purposes.
Reportable business segment information for the three months ended
September 30, 1999, nine months ended September 30, 1999 and as of September 30,
1999 follows:
<TABLE>
<CAPTION>
Reportable Segments
------------------- Non- Non-
Contract Reportable Segmented
E&P Services Segments Items Total
---------- --------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Three months ended September 30, 1999:
Revenues $ 451,917 $ 410,540 $ -- $ -- $ 862,457
Net profit or (loss)(1) (721,408) 80,296 (11,571) (419,737) (1,072,420)
Nine months ended September 30, 1999:
Revenues 1,045,669 589,337 -- -- 1,635,006
Net loss(2) (963,059) (36,164) (31,355) (1,553,594) (2,584,172)
As of September 30, 1999:
Identifiable net property
and equipment(3) 2,116,829 549,169 -- 176,772 2,842,770
</TABLE>
(1) Non-segmented items include $551,430 of general and administrative
expenses, $155,215 of other income and $23,522 of corporate DD&A.
(2) Non-segmented items include $1,830,377 of general and administrative
expenses, $362,649 of other income and $85,866 of corporate DD&A.
(3) Non-segmented items include $176,772 of corporate office equipment,
hardware and software.
Reportable business segment information for the three months ended
September 30, 1998, nine months ended September 30, 1998 and as of September 30,
1998 follows:
<TABLE>
<CAPTION>
Reportable Segments
--------------------- Non- Non-
Contract Reportable Segmented
E&P Services Segments Items Total
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Three months ended September 30, 1998:
Revenues $ 275,523 $ 150,065 $ -- $ -- $ 425,588
Net loss(1) (5,907,457) (43,808) (4,084) (437,019) (6,392,368)
Nine months ended September 30, 1998:
Revenues 1,346,559 150,065 -- -- 1,496,624
Net loss(2) (6,394,303) (222,065) (24,631) (1,623,836) (8,264,835)
As of September 30, 1998:
Identifiable net property
and equipment (3) 1,898,886 772,240 -- 279,274 2,950,400
</TABLE>
(1) Non-segmented items include $524,955 of general and administrative
expenses, $118,552 of other income and $30,616 of corporate DD&A.
(2) Non-segmented items include $1,948,850 of general and administrative
expenses, $414,737 of other income and $89,723 of corporate DD&A.
(3) Non-segmented items include $279,274 of corporate office equipment,
hardware and software.
Note 4: Supplemental Non-Cash Activity Disclosure
Non-Cash Investing Activities
During the nine months ended September 30, 1999, additions to oil and gas
properties included $131,500 of unproved property additions financed by accrued
liabilities.
Non-Cash Financing Activities
During the three months ended March 31, 1998, two of FX Energy's officers
exercised their options to purchase 150,000 shares each of FX Energy's common
stock at $1.50 per share. Each officer utilized a $100,000 bonus earned during
1997 and a $125,000 note payable to FX Energy to pay for the cost of exercising
their respective options.
Note 5: Net Loss Per Share
Basic earnings per share is computed by dividing the net loss by the
weighted average number of common shares outstanding. Diluted earnings per
share is computed by dividing the net loss by the sum of the weighted average
number of common shares and the effect of dilutive unexercised stock options and
warrants and convertible preferred stock. Options and warrants to purchase
3,692,572 shares of common stock at prices ranging from $1.50 to $10.25 per
share were outstanding at September 30, 1999. Options and warrants to purchase
3,270,239 shares of common stock at prices ranging from $1.50 to $10.25 per
share were outstanding at September 30, 1998. No options or warrants were
included in the computation of diluted earnings per share for the periods ended
September 30, 1999 and 1998 because the effect would have been antidilutive.
Note 6: Advances to Officers
During the first nine months of 1999, FX Energy made final advances to two
officers in accordance with the April 10, 1998 agreements with such officers.
FX Energy now has no further commitment to advance additional funds to the
officers. As of September 30, 1999, advances to officers was $2,000,456
including principal and accrued interest at 7.7% from the date of each advance.
The advances are payable to FX Energy on or before December 31, 1999.
Note 7: Private Placement of Securities
During May 1999, FX Energy completed a private placement that resulted in
the sale of 1,792,500 shares of common stock resulting in gross proceeds of $7.2
million ($7.1 million net of offering costs). The proceeds from this placement
were intended to be used to partially fund activities on the Lachowice Farm-in
and for other general corporate purposes. No placement fees were paid by FX
Energy in connection with the sale of the aforementioned shares.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking Information May Prove Inaccurate
This report contains statements about the future, sometimes referred to as
"forward-looking" statements. Forward-looking statements are typically
identified by the use of the words "believe," "may," "will," "should," "expect,"
"anticipate," "estimate," "project," "propose," "plan," "intend" and similar
words and expressions. Statements that describe FX Energy's future strategic
plans, goals or objectives are also forward-looking statements.
Readers of this report are cautioned that any forward-looking statements,
including those regarding FX Energy or its management's current beliefs,
expectations, anticipations, estimations, projections, proposals, plans or
intentions, are not guarantees of future performance or results of events and
involve risks and uncertainties, such as
. The future results of drilling individual wells and other exploration and
development activities;
. Future events that may result in the need for additional capital;
. Fluctuations in prices for oil and gas;
. Uncertainties of certain terms to be determined in the future relating to FX
Energy's oil, gas and mining interests, including exploitation fees, royalty
rates and other matters;
. Future drilling and other exploration schedules and sequences for various
wells and other activities;
. Uncertainties regarding future political, economic, regulatory, fiscal,
taxation and other policies in Poland;
. The future ability of FX Energy to attract strategic partners to share the
costs of exploration, exploitation, development and acquisition activities;
and
. Future plans and the financial and technical resources of strategic partners.
The forward-looking information is based on present circumstances and on FX
Energy's predictions respecting events that have not occurred, which may not
occur or which may occur with different consequences from those now assumed or
anticipated. Actual events or results may differ materially from those
discussed in the forward-looking statements as a result of various factors
detailed in this report. The forward-looking statements included in this report
are made only as of the date of this report. FX Energy is not obligated to
update such forward-looking statements or to update reasons that actual results
differ materially from those anticipated in such forward looking statements.
Corporate Overview
FX Energy explores for oil and gas in the Republic of Poland, where it
holds the largest exploration acreage position by a foreign company, in terms of
both gross and net acres, covering approximately 15.8 million gross acres. FX
Energy is exploring most of its Polish acreage with two strategic partners:
Apache Corporation ("Apache) and the Polish Oil and Gas Company ("POGC").
In the western United States, FX Energy produces oil from fields in Montana
and Nevada, has a contract drilling and well servicing company in northern
Montana and oil and gas exploration prospects in several western states.
Financial Condition
Working Capital
FX Energy's working capital was $7,505,000 as of September 30, 1999, an
increase of $3,540,000 as compared to $3,965,000 at December 31, 1998. The
increase was principally due to net proceeds of $7,054,000 from a private
placement of 1,792,500 shares of FX Energy's common stock during the second
quarter of 1999.
Operating Activities
Net cash used in operating activities was $3,173,000 during the first nine
months of 1999, an increase of $810,000 as compared to $2,363,000 for the same
period of 1998. During the first nine months of 1999, FX Energy had a net loss
after operating adjustments of $2,185,000 and incurred negative net working
capital changes of $988,000. During the first nine months of 1998, FX Energy
had a net loss after operating adjustments of $2,473,000 and incurred positive
net working capital changes of $110,000.
Investing Activities
Net cash used in investing activities was $3,445,000 during the first nine
months of 1999, as compared to net cash provided by investing activities of
$115,000 for the same period of 1998. During the first nine months of 1999, FX
Energy spent $78,000 on upgrading its producing properties, a net amount of
$305,000 on unproved properties, $63,000 on upgrading its drilling well
servicing equipment, $17,000 on miscellaneous assets, and a net amount of
$2,982,000 on investing in marketable debt securities. During the first nine
months of 1998, FX Energy spent $123,000 to upgrade its producing properties, a
net amount of $42,000 for undeveloped leaseholds, a net amount of $149,000 to
upgrade its drilling and well servicing equipment, $85,000 for additional office
equipment and $145,000 on other assets. Also, during the first nine months of
1998, FX Energy received $500,000 from Apache as an up front cash payment
relating to Apache's participation in FX Energy's Carpathian Project Area and
had a net increase in marketable debt securities of $159,000.
Financing Activities
Net cash provided by financing activities was $6,469,000 during the first
nine months of 1999, as compared to $709,000 used in financing activities in the
same period of 1998. During the first nine months of 1999, FX Energy advanced
two of its officers a total of $598,000, realized net proceeds after offering
costs of $7,054,000 from the sale of 1,792,500 shares of FX Energy's common
stock and options to purchase 2,000 shares of FX Energy's common stock were
exercised resulting in net proceeds of $13,000. During the first nine months of
1998, FX Energy advanced two officers $869,000 and options and warrants for
379,122 shares were exercised resulting in net proceeds of $610,000, including
$160,000 in cash, notes receivable of $250,000 and a reduction in accrued
liabilities of $200,000.
Polish Acreage
FX Energy holds oil and gas exploration rights on approximately 15.8
million gross acres in Poland as follows: (1) approximately 0.9 million gross
acres in which FX Energy holds a one-hundred percent interest; (2) approximately
2.9 million gross acres in which FX Energy and Apache each hold a fifty-percent
interest; (3) approximately 8.6 million gross acres in which FX Energy and
Apache each hold a fifty-percent interest subject to proportionate reduction by
POGC's option to participate with up to a one-third interest determined on a
block by block basis; and (4) approximately 3.4 million gross acres held by
POGC in which FX Energy and Apache have options to participate with up to a one-
third interest each.
FX Energy and Apache Joint Exploration in Poland
Area of Mutual Interest ("AMI Agreement") and the Apache Exploration
Program
FX Energy and Apache entered into an AMI Agreement effective January 1,
1999, which further defined and modified several earlier agreements between FX
Energy and Apache relating to their joint exploration activities in Poland. All
of these agreements together, and the operations and obligations that relate to
these agreements, are referred to as the "Apache Exploration Program". The AMI
Agreement covers the entire country of Poland except for the 0.9 million acre
Baltic Project Area. Under terms of the AMI Agreement, FX Energy and Apache
must offer each other a fifty-percent interest in any new exploration,
appraisal, development, acquisition or other oil and gas activity entered into
in Poland during 1999 and 2000. Under terms of the Apache Exploration Program,
Apache has either paid or committed to pay FX Energy's pro-rata share of the
following items:
Initial Completed Remaining
Commitment Commitments Commitments
---------- ----------- -----------
Up-front cash $950,000 $950,000 --
Drilling costs(1) 10 wells 3 wells 7 wells
2D seismic(2) 2,000 km 1,650 km 350 km
Concession and usufruct fees $855,000 $815,000 $40,000
G&A costs incurred in Poland All through 1999 All to date Balance of 1999
(1)As of September 30, 1999, Apache had covered FX Energy's pro-rata share of
costs for three exploratory wells and committed to covering FX Energy's pro-
rata share of cost of the Siedliska 2, the fourth of ten exploratory wells,
which was still being drilled as of September 30, 1999.
(2)Apache completed acquiring 1,650 kilometers of 2D seismic in the Lublin Basin
during 1998 and has committed to completing 350 kilometers of 2D seismic in
the Carpathian area of southern Poland during 2000 and 2001.
Exploratory Activities - Apache Exploration Program
The Czernic 277-2, Poniatowa 317-1 and the Witkow 1, the first three
exploratory wells drilled under terms of the Apache Exploration Program, were
all determined to be exploratory dry holes during the first nine months of 1999.
These wells tested potentially productive Carboniferous and Devonian horizons in
southeastern Poland. In accordance with terms of the Apache Exploration
Program, Apache covered all of FX Energy's working interest share of costs for
all three wells, including 33.33% for the Czernic 277-2, 47.5% for the
Poniatowa 317-1 and 45% for the Witkow 1. Drilling operations on the fourth
well, the Siedliska 2, commenced in July, 1999 with POGC as operator. Apache
has committed to cover all of FX Energy's 33.3% drilling and completion costs
for the Siedliska 2. This well is designed to test a potentially productive
Cambrian horizon in east-central Poland. Drilling results of the Siedliska 2
are expected during the fourth quarter of 1999. Drilling operations on the
fifth well, the Wilga 2 in central Poland, are expected to commence in November
1999. Apache will cover all of FX Energy's 45% drilling and completion costs
for the Wilga 2. The Apache Exploration Program requires commencement of
drilling on the sixth and seventh wells before the end of 1999.
During June 1999, FX Energy elected to participate in drilling the
Andrychow 6, an exploratory well operated by POGC on POGC option acreage in
southern Poland. FX Energy is paying for a 5% working interest in the well,
which is designed to test a potentially productive Devonian formation. POGC
commenced drilling the Andrychow 6 during the first week of July 1999. Drilling
results of the Andrychow 6 are expected by the end of 1999.
Lachowice Farm-in Agreement
On February 26, 1999, FX Energy and Apache entered into a farm-in agreement
with POGC with respect to POGC's Lachowice area, a Devonian gas discovery.
Under terms of the agreement, FX Energy and Apache each agreed to pay fifty-
percent of the cost to test and recomplete up to three shut-in gas wells. Based
upon the testing and recompletion results, FX Energy and Apache have the option
to each earn a one-third interest in the Lachowice area by each paying fifty-
percent of the cost to drill three additional wells and construct related
production facilities.
The Lachowice area contains three shut-in gas wells, the Lachowice 1,
Stryszawa 2K and Lachowice 7. During June 1999, FX Energy and Apache commenced
testing and recompletion procedures on the Stryszawa 2K. The Stryszawa 2K was
subsequently plugged and abandoned after it failed to maintain a production rate
sufficient to warrant construction of related production facilities. Flow
testing began in September 1999 to determine the commercial potential of the
Lachowice 7 well. The flow rate was controlled under a predetermined testing
plan of 3.0 MMcf per day. Following the initial flow-test, the well was shut-in
to allow pressure build-up in order to appraise the commercial potential of the
gas reservoir. FX Energy plans to review the results of the Andrychow 6, which
is currently drilling to the same horizon tested in the Lachowice 7, before
completing its economic modeling and initiating discussions with POGC about
possible additional operations.
Capital Requirements
General
As of September 30, 1999, FX Energy had $7.6 million of cash and marketable
debt securities with no long-term debt. In view of the Apache Exploration
Program, this amount is expected to be sufficient to fund FX Energy's present
minimum exploration and operating commitments during the remainder of 1999 and
2000. FX Energy intends to seek additional capital to fund any activities
outside the scope of its present minimum exploration and operating activities,
including development capital to fund any exploration success FX Energy may have
or to fund any acquisition of additional oil and gas property interests in
Poland.
The allocation of FX Energy'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, appraisal, development, acquisition and other activities. FX
Energy may obtain funds for future capital investments from the sale of
additional securities, bank financing, project financing, sale of partial
property interests, strategic alliances with other energy or financial partners
or other arrangements, some of which may dilute the interest of existing
shareholders in FX Energy or FX Energy's interest in the specific project
financed. There can be no assurance that additional funds could be obtained or,
if obtained, would be on terms favorable to FX Energy.
Exploration, Appraisal and Development Capital
During the remainder of 1999, FX Energy expects to have substantially all
the cost of its share of exploration activities covered by Apache. To date,
Apache has completed drilling three required exploratory wells and is in the
process of drilling the fourth well. Apache is obligated to finish its ten well
drilling requirement by commencing the drilling of three more wells in 1999, two
additional wells during 2000 and one well in 2001.
During July 1999, FX Energy elected to pay for a five-percent working
interest in drilling the Andrychow 6, an exploratory well operated by POGC
located on POGC option acreage near the Lachowice area in southern Poland. FX
Energy's pro-rata share of costs for the Andrychow 6 is expected to be
approximately $110,000 and drilling results are expected before the end of 1999.
Appraisal and development activity on the Lachowice Farm-in commenced
during the second quarter of 1999. Through the end of the third quarter of
1999, FX Energy incurred approximately $652,000 of cost relating to the
Lachowice Farm-in. FX Energy plans to review the results of the Andrychow 6,
which is currently drilling to the same horizon tested in the Lachowice 7,
before completing its economic modeling and initiating discussions with POGC
about possible additional operations. Based upon a completed economic evaluation
and drilling results from the Andrychow 6, FX Energy and Apache will then decide
whether to proceed with the Lachowice Farm-in. FX Energy allocated $3.4 million
of the net proceeds of its $7.1 million private placement completed in May 1999
to partially fund activities related to the Lachowice Farm-in.
Additional exploration of the 0.9 million acre Baltic Project Area has been
deferred until FX Energy obtains an industry partner. Due to its increasing
focus on Poland, FX Energy expects to incur minimal exploration, appraisal and
development expenditures on its domestic operations during the remainder of 1999
and 2000.
Property Acquisition Capital
During June 1999, FX Energy filed a $100 million Shelf Registration
Statement with the Securities and Exchange Commission ("SEC") to fund planned
expansion in Poland. FX Energy is currently in negotiations to acquire an
interest in areas within Poland currently controlled by POGC with a mix of
proved producing reserves, proved non-producing reserves and additional
exploration opportunities. FX Energy plans to utilize the $100 million Shelf
Registration Statement to fund the capital requirements resulting from any new
property acquisitions in Poland through a combination of debt and equity
securities or may utilize bank debt or other financing alternatives.
Results of Operations by Business Segment
FX Energy operates within two segments of the oil and gas industry: the E&P
segment and the contract services segment. Mining, which consists of gold
exploration on FX Energy's Sudety Project Area in Poland, is immaterial to FX
Energy and is not considered to be a reportable business segment by FX Energy
and is excluded from the following discussion. Depreciation, depletion and
amortization costs ("DD&A") directly associated with their respective segments
are detailed within the following discussion. General and administrative costs
("G&A"), interest income and other income are not allocated to individual
operating segments for management or segment reporting purposes and are
discussed in their entirety following the segment discussion.
Comparison of the third quarter of 1999 to the third quarter of 1998
E&P - Oil and Gas Segment
Oil Revenues
Oil revenues were $452,000 during the third quarter of 1999, an increase of
$176,000 as compared to $276,000 during the same period of 1998. During the
third quarter of 1999, FX Energy's oil revenues were positively affected by
increased oil prices and negatively affected by lower production rates
attributable to the natural production declines of FX Energy's producing
properties. During the third quarter of 1998, FX Energy's oil revenues were
negatively affected by decreased oil prices, the use of company owned servicing
equipment on third-party properties and lower production rates attributable to
the natural production declines of FX Energy's producing properties. A summary
of the percentage change in oil revenues, average oil price and oil production
for the third quarter of 1999 and 1998 as compared to their respective prior
year period are set forth in the following table:
Quarter ended September 30,
--------------------------
1999 1998
------------ ------------
Oil revenues $ 452,000 $ 276,000
Percent change versus prior year's quarter +64% -43%
Average oil price $ 18.02 $ 9.32
Percent change versus prior year's quarter +93% -39%
Production volumes (bbls) 25,075 29,572
Percent change versus prior year's quarter -15% -6%
Gain on Sale of Property Interests
FX Energy recognized no gain on sale of property interests during the third
quarter of 1999 and the third quarter of 1998. The amount of gain on sale of
property interests will continue to vary from period to period, depending on the
timing of completed deals and the amount of up-front cash consideration, if any.
Lease Operating Costs
FX Energy's lease operating costs are composed of normal recurring lease
operating expenses ("LOE") and production taxes. Lease operating costs were
$229,000 during the third quarter of 1999, a decrease of $19,000 as compared to
$248,000 during the same period of 1998. A comparative discussion of each
component of lease operating costs incurred during the third quarter of 1999 and
1998 follows:
LOE was $217,000 during the third quarter of 1999, a decrease of $14,000 as
compared to $231,000 during the same period of 1998. During the third quarter
of 1999, FX Energy continued to defer workovers and reduced its LOE by utilizing
a re-designed pattern of injecting fluids initiated during the first quarter of
1999 into the Cut Bank Sand Unit, its principal producing property. However,
production declined approximately 15% during the third quarter of 1999, as
compared to the same period of 1998, principally due to marginal wells that were
previously shut-in after the third quarter of 1998 and had not been brought back
into production as of the end of the third quarter of 1999. The 15% production
decline resulted in the lifting cost per barrel increasing to $8.65 during the
third quarter of 1999, an increase of $.83 as compared to $7.82 in the same
period of 1998. During the third quarter of 1998, FX Energy deferred workovers
and performed only routine maintenance on its producing properties due to
depressed and volatile oil prices.
Production taxes were $12,000 during the third quarter of 1999, a decrease
of $5,000 as compared to $17,000 during the same period of 1998. The decrease
in production taxes during the third quarter of 1999 was attributable to lower
production volumes and a substantial reduction in the Montana severance tax rate
on stripper wells which was partially offset by higher oil prices during the
third quarter of 1999 as compared to the same period of 1998. Refer to the
table in E&P - Oil and Gas Segment Oil Revenues for the percentage fluctuations
in the average oil price and oil production for the third quarter of 1999 and
1998 as compared to their respective prior year periods.
Exploration Costs
FX Energy's exploration costs consist of geological and geophysical costs
("G&G"), exploratory dry holes and non-producing leasehold impairments.
Exploration costs were $944,000 during the third quarter of 1999, an increase of
$715,000 as compared to $229,000 during the same period of 1998. Exploration
costs include $12,000 and $4,000 during the third quarter of 1999 and 1998,
respectively, of G&G costs relating to FX Energy's mining operations, which are
excluded from the discussion of the results of operations for this segment. A
comparative discussion of each component of exploration costs incurred during
the third quarter of 1999 and 1998 follows:
G&G costs were $352,000 during the third quarter of 1999, an increase of
$124,000 as compared to $228,000 during the same period of 1998. During the
third quarter of 1999, FX Energy's G&G costs were primarily covered by Apache in
accordance with the Apache Exploration Program terms, except for the Pomeranian
and Warsaw West project areas, where FX Energy spent $140,000 and $97,000,
respectively, primarily on reprocessing 2D seismic. During the third quarter of
1998, FX Energy incurred $100,000 of additional G&G costs in the Lublin Project
Area for its share of a 2D seismic acquired jointly with Apache. G&G costs will
continue to fluctuate from period to period, based on FX Energy's level of
exploratory activity in Poland and the respective cost participation percentage
of FX Energy's industry partners.
Exploratory dry hole costs were $580,000 during the third quarter of 1999,
as compared to a exploratory dry hole cost credit of $3,000 during the third
quarter of 1998. During the third quarter of 1999, FX Energy wrote off the cost
of re-entering the Stryszawa 2K in the Lachowice area after the well did not
obtain a commercial production rate. During the third quarter of 1998, FX
Energy received a credit of $3,000 from a vendor relating to an exploratory dry
hole drilled during 1997.
There were no non-producing leasehold impairments during the third quarter
of 1999 and 1998. As of September 30, 1999, FX Energy had capitalized unproved
property costs of $1,616,000, including $712,000 domestically and $904,000 in
Poland. In accordance with generally accepted accounting principles, an
impairment charge will be recognized, determined on a property by property
basis, in the event FX Energy determines any capitalized unproved property costs
are not recoverable following unsuccessful exploration drilling or other
factors. Non-producing leasehold impairments will continue to vary from period
to period based on FX Energy's determination that capitalized costs of unproved
properties, on a property by property basis, are not realizable.
Domestic Proved Property Impairment
There were no producing property impairments during the third quarter of
1999 as compared to $5,640,000 during the third quarter of 1998. As of
September 30, 1998, FX Energy's PV-10 value for its domestic proved properties
was approximately $727,000, consisting solely of proved developed reserves
utilizing an average oil price of $9.32 per barrel, an amount which, in
management's opinion, approximated fair value. An impairment test was performed
on a property by property basis which resulted in a domestic proved property
impairment of $5,640,000 for the first nine months of 1998 and a net carrying
value of $719,000 for FX Energy's domestic proved properties as of September 30,
1998.
DD&A Expense - E&P
DD&A expense for producing properties was $12,000 for the third quarter of
1999, a decrease of $59,000 as compared to $71,000 during the same period of
1998. The decrease during the third quarter of 1999 was directly attributable
to the $5,885,000 write down of proved producing properties by FX Energy during
the third and fourth quarters of 1998. As a result of the write down, the DD&A
rate per barrel for the third quarter of 1999 was $.47, a decrease of $1.92 as
compared to $2.39 during the same period of 1998.
Contract Services - Oil and Gas Segment
Contract Servicing Revenues
FX Energy had contract servicing revenues of $411,000 during the third
quarter of 1999, an increase of $261,000 as compared to $150,000 contract
servicing revenues during the third quarter of 1998. During the third quarter
of 1999, FX Energy's drilling rig and well servicing equipment generated gross
profit before depreciation of $162,000 from contract work on third party
properties as FX Energy emphasized utilizing its drilling and well servicing
equipment on third party properties in an effort to maximize revenues. During
the third quarter of 1998, FX Energy's drilling rig and well servicing equipment
generated gross profit before depreciation of $36,000 from contract work on
third party properties as FX Energy initially began to emphasize contracting out
its drilling and well servicing equipment to third parties. Contract servicing
revenues will continue to fluctuate period to period based on the degree of
emphasis on utilizing equipment on Company owned properties, the number of wells
drilled, the amount of retained working interest, if any, and other factors.
Contract Servicing Costs
Contract servicing costs were $249,000 during the third quarter of 1999, an
increase of $135,000 as compared to $114,000 for the same period of 1998.
During the third quarter of 1999, all contract servicing costs were directly
associated with contract third party work, which generated a gross profit before
depreciation of approximately 39% during the period. During the third quarter
of 1998, all contract servicing costs were also directly associated with
contract third party work, which generated a gross profit before depreciation of
approximately 24% during the period. Contract servicing costs will continue to
fluctuate period to period based on the amount of revenue generated, rig
downtime, the degree of emphasis on utilizing equipment on Company owned
properties, the number of wells drilled, the amount of retained working
interest, if any, and other factors.
DD&A Expense - Contract Servicing
DD&A expense for contract servicing was $80,000 during the third quarter of
1999, an increase of $1,000 as compared to $79,000 during the same period of
1998. During the last three months of 1998 and the first nine months of 1999,
FX Energy spent $103,000 to upgrade its drilling and well servicing equipment,
which in turn resulted in a higher DD&A expense during the third quarter of 1999
as compared to the same period of 1998.
Non-segmented Information
G&A Costs
G&A costs were $551,000 during the third quarter of 1999, an increase of $26,000
as compared to $525,000 for the same period of 1998. Primarily as a result of
its level of activities in Poland during the third quarter of 1999, FX Energy
incurred slightly more investor relations, travel and other associated G&A costs
during the third quarter of 1999 as compared to the same period of 1998. G&A
costs are expected to continue at current or higher levels with fluctuations
from period to period due to the level of FX Energy's activities in Poland and
the respective cost participation percentage of FX Energy's industry partners.
DD&A Expense - Corporate
DD&A expense for corporate activities was $24,000 during the third quarter
of 1999, a decrease of $7,000 as compared to $31,000 during the same period of
1998. The decrease during the third quarter of 1999 as compared to the same
period of 1998 is primarily the result of office equipment with a depreciable
life of three years becoming fully depreciated prior to the third quarter of
1999.
Interest and Other Income
Interest and other income was $155,000 during the third quarter of 1999, an
increase of $36,000, as compared to $119,000 during the same period of 1998. FX
Energy's cash and marketable debt securities average balances during the third
quarter of 1999 were substantially higher as compared to the same period of
1998. Interest income was $153,000 during the third quarter of 1999 as compared
to $118,000 in the same period of 1998.
Comparison of the first nine months of 1999 to the first nine months of
1998
E&P - Oil and Gas Segment
Oil Revenues
Oil revenues were $1,046,000 during the first nine months of 1999, an
increase of $166,000 as compared to $880,000 during the same period of 1998.
During the first nine months of 1999 and 1998, FX Energy's oil revenues were
subject to price volatility, the use of company owned servicing equipment on
third-party properties and lower production rates attributable to the natural
production declines of FX Energy's producing properties. A summary of the
percentage change in oil revenues, average oil price and oil production
for the first nine months of 1999 and 1998 as compared to their respective prior
year period are set forth in the following table:
Nine Months Ended September 30,
-------------------------------
1999 1998
------------- ---------------
Oil revenues $ 1,046,000 $ 880,000
Percent change versus prior year's first
nine months +19% -44%
Average oil price $ 13.59 $ 10.18
Percent change versus prior year's first
nine months +33% -39%
Production volumes (bbls) 76,970 86,407
Percent change versus prior year's first
nine months -11% -8%
Gain on Sale of Property Interests
FX Energy recognized no gain on sale of property interests during the first
nine months of 1999, as compared to $467,000 during the first nine months of
1998. During the first nine months of 1998, Apache paid FX Energy $500,000 of
up-front cash consideration relating to its participation in FX Energy's Western
Carpathian Concession, which was partially offset by associated costs of
$33,000. The amount of gain on sale of property interests will continue to vary
from period to period, depending on the timing of completed deals and the amount
of up-front cash consideration, if any.
Lease Operating Costs
Lease operating costs were $682,000 during the first nine months of 1999, a
decrease of $104,000 as compared to $786,000 during the same period of 1998. A
comparative discussion of each component of lease operating costs incurred
during the first nine months of 1999 and 1998 follows:
LOE was $631,000 during the first nine months of 1999, a decrease of
$97,000 as compared to $728,000 during the same period of 1998. During the
first nine months of 1999, FX Energy deferred workovers and further reduced its
LOE by re-designing the pattern of injecting fluids into the Cut Bank Sand Unit,
its principal producing property. However, production declined approximately 11%
during the first nine months of 1999, as compared to the same period of 1998,
principally due to marginal wells that were previously shut-in after the third
quarter of 1998 and had not been brought back into production as of the end of
the third quarter of 1999. As a result, electrical, maintenance, labor and
other costs were reduced and the lifting cost per barrel declined to $8.20
during the first nine months of 1999, a decrease of $.22 as compared to $8.43
for the first nine months of 1998. The decrease in lifting costs per barrel was
adversely impacted by a production rate decrease of approximately 11% in the
first nine months of 1999 as compared to the same period of 1998. During the
first nine months of 1998, FX Energy deferred workovers and performed only
routine maintenance on its producing properties due to depressed and volatile
oil prices.
Production taxes were $51,000 during the first nine months of 1999, a
decrease of $7,000 as compared to $58,000 during the same period of 1998. The
fluctuation in production taxes from period to period is directly associated
with oil price volatility, changes in oil production rates from period to period
and a substantial reduction of the Montana severance tax rate for stripper wells
during 1999. Refer to the table in E&P - Oil and Gas Segment Oil Revenues for
the percentage fluctuations in the average oil price and oil production for the
first nine months of 1999 and 1998 as compared to their respective prior year
periods.
Exploration Costs
Exploration costs were $1,318,000 during the first nine months of 1999, an
increase of $189,000 as compared to $1,129,000 during the same period of 1998.
Exploration costs include $31,000 and $25,000 during the nine months ended
September 30, 1999 and 1998, respectively, of G&G costs relating to FX Energy's
mining operations, which are excluded from the discussion of the results of
operations for this segment. A comparative discussion of each component of
exploration costs incurred during the first nine months of 1999 and 1998
follows:
G&G costs were $674,000 during the first nine months of 1999, a decrease of
$421,000 as compared to $1,095,000 during the same period of 1998. During the
first nine months of 1999, FX Energy's G&G costs were primarily covered by
Apache in accordance with the Apache Exploration Program terms, except for the
Pomeranian and Warsaw West project areas, where FX Energy spent $168,000 and
$97,000, respectively, primarily on reprocessing 2D seismic. During the first
nine months of 1998, FX Energy incurred $400,000 of G&G costs in the Lublin
Project Area for its share of 2D seismic acquired jointly with Apache and issued
stock valued at $119,000 to a Polish citizen for consulting services. G&G costs
will continue to fluctuate from period to period, based on FX Energy's level of
exploratory activity in Poland and the respective cost participation percentage
of FX Energy's industry partners.
Exploratory dry hole costs were $613,000 during the first nine months of
1999, an increase of $604,000 as compared to $9,000 during the first nine months
of 1998. During the first nine months of 1999, FX Energy wrote off $580,000
relating to the cost of re-entering the Stryszawa 2K in the Lachowice area after
the well did not obtain a commercial production rate and incurred $33,000 of
additional costs relating to exploratory dry holes drilled during 1997. All of
the exploratory dry hole costs incurred during the first nine months of 1998
were associated with exploratory dry holes drilled during 1997.
There were no non-producing leasehold impairments during the first nine
months of 1999 and 1998. As of September 30, 1999, FX Energy had capitalized
unproved property costs of $1,616,000, including $712,000 domestically and
$904,000 in Poland. In accordance with generally accepted accounting
principles, an impairment charge will be recognized, determined on a property by
property basis, in the event FX Energy determines any capitalized unproved
property costs are not recoverable following unsuccessful exploration drilling
or other factors. Non-producing leasehold impairments will continue to vary
from period to period based on FX Energy's determination that capitalized costs
of unproved properties, on a property by property basis, are not realizable.
DD&A Expense - E&P
DD&A expense for producing properties was $40,000 for the first nine months
of 1999, a decrease of $170,000 as compared to $210,000 during the same period
of 1998. The decrease during the first nine months of 1999 was directly
attributable to the $5,885,000 write down of proved producing properties by FX
Energy during the third and fourth quarters of 1998. As a result of the write
down, the DD&A rate per barrel for the first nine months of 1999 was $.52, a
decrease of $1.92 as compared to $2.44 during the same period of 1998.
Domestic Proved Property Impairment
There were no producing property impairments during the first nine months
of 1999 as compared to $5,640,000 during the first nine months of 1998. As of
September 30, 1998, FX Energy's PV-10 value for its domestic proved properties
was approximately $727,000, consisting solely of proved developed reserves
utilizing an average oil price of $9.32 per barrel, an amount which, in
management's opinion, approximated fair value. An impairment test was performed
on a property by property basis which resulted in a domestic proved property
impairment of $5,640,000 for the first nine months of 1998 and a net carrying
value of $719,000 for FX Energy's domestic proved properties as of September 30,
1998.
Contract Services - Oil and Gas Segment
Contract Servicing Revenues
FX Energy had contract servicing revenues of $589,000 during the first nine
months of 1999, an increase of $439,000 as compared to $150,000 contract
servicing revenues during the first nine months of 1998. During the first nine
months of 1999, FX Energy's drilling rig and well servicing equipment generated
a gross profit before depreciation of $207,000 from contract work on third party
properties as FX Energy emphasized utilizing its drilling and well servicing
equipment on third party properties in an effort to maximize revenues. During
the first nine months of 1998, FX Energy's drilling and well servicing equipment
was used primarily on Company owned properties, resulting in a limited amount
of contract servicing revenues and a gross profit before depreciation of $15,000
from third party sources. Contract servicing revenues will continue to
fluctuate period to period based on the degree of emphasis on utilizing
equipment on Company owned properties, the number of wells drilled, the amount
of retained working interest, if any, and other factors.
Contract Servicing Costs
Contract servicing costs were $383,000 during the first nine months of
1999, an increase of $248,000 as compared to $135,000 for the same period of
1998. During the first nine months of 1999, all contract servicing costs were
directly associated with contract third party work performed by FX Energy's well
servicing equipment, which generated a gross profit before depreciation of
approximately 35% during the period. During the first nine months of 1998, FX
Energy's drilling and well servicing equipment was used primarily on Company
owned properties, resulting in downtime maintenance costs of $21,000 associated
with the drilling rig and $114,000 of costs associated with third party contract
work and an overall gross profit before depreciation of 10%. Contract servicing
costs will continue to fluctuate from period to period based on the amount of
revenue generated, rig downtime, the degree of emphasis on utilizing equipment
on Company owned properties, the number of wells drilled, the amount of retained
working interest, if any, and other factors.
DD&A Expense - Contract Servicing
DD&A expense for contract servicing was $243,000 during the first nine
months of 1999, an increase of $6,000 as compared to $237,000 during the same
period of 1998. During the last three months of 1998 and the first nine months
of 1999, FX Energy spent $103,000 to upgrade its drilling and well servicing
equipment, which in turn resulted in a higher DD&A expense during the first nine
months of 1999 as compared to the same period of 1998.
Non-segmented Information
G&A Costs
G&A costs were $1,830,000 during the first nine months of 1999, a decrease
of $119,000 as compared to $1,949,000 for the same period of 1998. Primarily as
a result of its level of activities in Poland during the first nine months of
1999, FX Energy incurred less investor relations, legal, travel and other
associated G&A costs during the first nine months of 1999 as compared to the
same period of 1998. G&A costs are expected to continue at current or higher
levels with fluctuations from period to period due to the level of FX Energy's
activities in Poland and the respective cost participation percentage of FX
Energy's industry partners.
DD&A Expense - Corporate
DD&A expense for corporate activities was $86,000 during the first nine
months of 1999, a decrease of $4,000 as compared to $90,000 during the same
period of 1998. The decrease during the first nine months of 1999 as compared
to the same period of 1998 is primarily the result of office equipment with a
depreciable life of three years becoming fully depreciated prior to 1999. DD&A
expense for corporate activities may continue to fluctuate in succeeding periods
due to equipment becoming fully depreciated and capital additions in prior
periods being depreciated in succeeding periods.
Interest and Other Income
Interest and other income was $363,000 during the first nine months of
1999, a decrease of $52,000 as compared to $415,000 during the same period of
1998. FX Energy's average cash and marketable debt securities balances were
lower during the first nine months of 1999 as compared to the same period of
1998. As a result, FX Energy earned $359,000 of interest income during the
first nine months of 1999 as compared to $401,000 for the same period of 1998.
Interest and other income will fluctuate from period to period, primarily due to
the average cash and marketable debt securities balances.
Year 2000
FX Energy uses computers principally for administrative functions such as
word processing, accounting, management reporting and financial forecasting. FX
Energy also uses computers for scientific functions such as map making,
geological interpretations and geophysical analysis. Substantially all of FX
Energy's principal computer systems have been purchased since 1996. FX Energy's
core software systems (accounting, internet, word processing and spreadsheet)
and vendors are certified as year 2000 compliant.
An ongoing program has been implemented by FX Energy to ensure that its
operational and financial systems will not be adversely affected by year 2000
software failures. In addition to its own computer systems, in connection with
its activities in the United States and in Poland, FX Energy interacts with
suppliers, customers, creditors and financial service organizations domestically
and globally which use computer systems. FX Energy has surveyed the major
businesses FX Energy interacts with during the normal course of business and
requested a certification of year 2000 compliance from each of them.
Substantially all of FX Energy's core vendors (banking, insurance, stock market-
makers, strategic partners, oil purchasers, communications, etc.) have either
already certified they are year 2000 compliant or indicated they will be before
the year 2000.
FX Energy intends to modify or replace those systems, if any, which are not
year 2000 compliant. It is impossible for FX Energy to monitor all such
systems, particularly those of parties in another country. There can be no
assurance that such systems will not have material adverse impacts on FX
Energy's business and operations. FX Energy estimates that the cost to
redevelop, replace or repair its technology will not be material and has not
expended any significant costs to date.
Other Matters
FX Energy has reviewed all recently issued, but not yet adopted, accounting
standards in order to determine their effects, if any, on the results of
operations or financial position of FX Energy. Based on that review, FX Energy
believes that none of these pronouncements will have a significant effect on
current or future earnings or operations.
PART II.
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are included as part of this report:
Exhibit SEC
Number Reference Title of Document Location
Number
- -------------------------------------------------------------------------------
27.01 27 Financial Data Schedule This filing
(b) Reports on form 8-K
During the quarter ended September 30, 1999, FX Energy filed the following
items on Form 8-K:
Date of Event Reported Item(s) Reported
---------------------- --------------------
August 30, 1999 Item 5. Other Events
July 21, 1999 Item 5. Other Events
July 7, 1999 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: November 5, 1999 By /s/ David N. Pierce
President, Director , Chief Executive Officer
Date: November 5, 1999 By /s/ Dennis L. Tatum
Vice-President, Treasurer and Chief Accounting
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF SEPTEMBER 30, 1999, AND STATEMENTS OF OPERATIONS FOR THE
NINE MONTHS THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Sep-30-1999
<CASH> 1,662,796
<SECURITIES> 5,911,625
<RECEIVABLES> 500,691
<ALLOWANCES> 0
<INVENTORY> 66,812
<CURRENT-ASSETS> 8,345,355
<PP&E> 2,842,770
<DEPRECIATION> 3,048,183
<TOTAL-ASSETS> 11,547,414
<CURRENT-LIABILITIES> 840,636
<BONDS> 0
<COMMON> 14,849
0
0
<OTHER-SE> 10,691,929
<TOTAL-LIABILITY-AND-EQUITY> 11,547,414
<SALES> 1,635,006
<TOTAL-REVENUES> 1,635,006
<CGS> 0
<TOTAL-COSTS> 4,581,827
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,584,172)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,584,172)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,584,172)
<EPS-BASIC> (0.18)
<EPS-DILUTED> (0.18)
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