UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
--------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission file number 1-4668
COASTAL CARIBBEAN OILS & MINERALS, LTD.
................................................................................
(Exact name of registrant as specified in its charter)
BERMUDA NONE
................................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Clarendon House, Church Street, Hamilton, Bermuda NONE
................................................................................
(Address of principal executive offices) (Zip Code)
441-295-1422
................................................................................
(Registrant's telephone number, including area code)
................................................................................
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
l934 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.
|X| Yes |_| No
The number of shares outstanding of the issuer's single class of common
stock as of July 17, 1998 was 40,056,358.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company
CONSOLIDATED BALANCE SHEET
(Expressed in U.S. dollars)
(unaudited)
June 30, December 31,
1998 1997
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 528,431 $ 316,333
Accounts and interest receivable 90,214 77,302
U.S. Government securities 2,446,786 3,433,035
Prepaid insurance 239,107 213,840
------------ ------------
Total current assets 3,304,538 4,040,510
------------ ------------
Unproved oil, gas and mineral properties (full cost method) 4,614,194 4,395,132
Other 28,006 26,765
------------ ------------
Total assets $ 7,946,738 $ 8,462,407
============ ============
LIABILITIES, MINORITY INTERESTS AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 153,765 $ 63,975
------------ ------------
Minority interests - -
Shareholders' equity:
Common stock, par value 12(cent) per share:
Authorized - 250,000,000 shares
Outstanding - 40,056, 358 shares 4,806,763 4,806,763
Capital in excess of par value 28,693,033 28,693,033
------------ ------------
33,499,796 33,499,796
Deficit accumulated during development stage (25,706,823) (25,101,364)
------------ ------------
Total shareholders' equity 7,792,973 8,398,432
------------ ------------
Total liabilities, minority interests and shareholders' equity $ 7,946,738 $ 8,462,407
============ ============
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company
CONSOLIDATED STATEMENT OF OPERATIONS
(Expressed in U.S. dollars)
(unaudited)
From inception
Three months ended Six months ended (Jan. 31, 1953)
June 30, June 30, to June 30,
1998 1997 1998 1997 1998
------- ------- ------- ------- ---------------
Interest and other income $46,807 $72,159 $98,781 $154,617 $3,604,907
------- ------- ------- -------- ----------
Expenses:
Legal fees and costs 149,005 162,939 262,944 321,151 11,732,847
Administrative expenses 123,588 103,021 256,878 226,411 6,626,027
Salaries 41,500 39,000 80,500 78,000 2,830,778
Shareholder communications 56,697 93,934 90,957 128,733 3,526,988
Exploration costs 5,480 2,503 12,961 10,055 765,555
Lawsuit judgments - - - - 1,941,916
Minority interests - - - - (632,974)
Other - - - - 364,865
Contractual services - - - - 2,155,728
------- ------- ------- ------- ----------
376,270 401,397 704,240 764,350 29,311,730
------- ------- ------- ------- ----------
Net loss $(329,463) $(329,238) $(605,459) $(609,733)
========== ========== ========== ==========
Deficit accumulated during
development stage $(25,706,823)
=============
Average number of shares
Outstanding (Basic & Diluted) 40,056,358 40,056,358 40,056,358 40,054,929
========== ========== ========== ==========
Net loss per share (Basic & Diluted) $(.01) $(.01) $(.02) $(.02)
====== ====== ====== ======
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in U.S. Dollars)
(unaudited)
From inception
Six months ended (Jan. 31, 1953)
June 30, to June 30,
1998 1997 1998
---------- ---------- --------------
Operating activities:
Net loss $ (605,459) $ (609,733) $(25,706,823)
Adjustments to reconcile net loss
to net cash used for operating activities:
Minority interest - (632,974)
Exploration and other - 755,974
Net change in:
Accounts receivable (12,912) (33,966) (90,214)
U.S. Government securities 986,249 669,209 986,249
Prepaid insurance (25,267) 44,480 (239,107)
Current liabilities 89,790 (196,729) 153,764
Other (1,241) (859) 470,900
---------- ---------- ------------
Net cash provided by (used for) operating 431,160 (127,598) (24,302,231)
---------- ---------- ------------
activities
Investing activities:
Additions to oil, gas, and mineral
Properties net of assets acquired
for common stock (219,062) (330,359) (4,614,194)
Reimbursement of lease rentals and
other expenses - - 1,243,086
U.S. Government securities sold (purchased) - 1,095 (3,433,035)
Purchase of fixed assets - - (61,649)
---------- ---------- ------------
Net cash provided by (used for) investing
Activities (219,062) (329,264) (6,865,792)
---------- ---------- ------------
Financing activities:
Cash proceeds from sale of
common stock less expenses - - 26,342,205
Shares issued upon exercise of
options - 11,250 884,249
Sale of shares by subsidiary - - 750,000
Sale of subsidiary shares - 240,000 3,720,000
---------- ---------- ------------
Net cash provided by financing activities - 251,250 31,696,454
---------- ---------- ------------
Net increase (decrease) in cash
and cash equivalents 212,098 (205,612)
Cash and cash equivalents at
beginning of period 316,333 424,330
---------- ----------
Cash and cash equivalents at
end of period $ 528,431 $ 218,718 $ 528,431
========== ========== ============
PART I - FINANCIAL INFORMATION
COASTAL CARIBBEAN OILS & MINERALS LTD.
June 30, 1998
ITEM 1 - Financial Statements
The information for the three and six month periods ended June 30, 1998
and 1997 is unaudited, but includes all adjustments which Coastal Caribbean Oils
& Minerals, Ltd. (the "Company") considers necessary for a fair statement of the
results of operations for those periods. The consolidated financial statements
include the Company's 59.25% owned subsidiary, Coastal Petroleum Company
("Coastal Petroleum").
Statements included in Management's Discussion and Analysis of
Financial Condition and Results of Operations which are not historical in nature
are intended to be, and are hereby identified as "forward looking statements"
for purposes of the "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995. The Company cautions readers that forward looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward looking
statements.
The Company's principal assets are oil, gas, and mineral leases, the
costs of which total $4.6 million at June 30, 1998. The Company has been and
continues to be involved in several legal proceedings against the State of
Florida which have limited the Company's ability to commence development
activities on its unproved oil and gas properties. These consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or amounts and classification
of liabilities that may result from the outcome of this uncertainty.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operation
Liquidity and Capital Resources
Short Term Liquidity
At June 30, 1998, Coastal Caribbean had cash and securities of
approximately $3.1 million. These funds are expected to be used for general
corporate purposes, including exploration and development and to continue the
litigation against the State of Florida.
PART I - FINANCIAL INFORMATION
COASTAL CARIBBEAN OILS & MINERALS LTD.
June 30, 1998
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operation (Cont'd)
Long Term Liquidity
The Company estimates that as much as $500,000 per year may be required
in connection with the Florida litigation. The Company expects that the Florida
litigation will continue at least through March 1999, although the State may
take actions that could shorten or lengthen that period. The Company has a
program to evaluate the Company's leases which is estimated to cost
approximately $1 million for the 1998-1999 period, and is subject to the outcome
of the Florida litigation. During the quarter ended June 30, 1998, the Company
spent approximately $219,000 under its continuing program to identify potential
drilling prospects.
The Company's oil and gas properties are currently unproved and
undeveloped. The Company has applied for a drilling permit from the State of
Florida to drill an exploratory well in the water near Apalachicola, Florida.
The State of Florida has resisted the issuance of a drilling permit. If the
Company is successful in obtaining a state drilling permit, then the Company
must also do the following:
1. Obtain a federal permit.
2. Finance drilling of the well (including the cost of the
recommended surety), which is estimated to cost approximately
$5.5 million.
3. Begin drilling the well within one year of the date the state
permit is issued.
The Company does not currently have assets sufficient to fund these
expenditures to drill the exploration well, if a permit were granted. If oil
and/or gas is discovered in commercial quantities, a production program would
require additional permitting and construction of production, storage and
delivery systems. The Company would be required to seek additional financing or
partners to fund these expenditures.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operation (Cont'd)
Results of Operations
Three month period ended June 30, 1998 vs. June 30, 1997
The Company incurred a loss of $329,000 for the 1998 quarter, compared
to a loss of $329,000 for the comparable 1997 quarter.
Interest income and other income decreased 35% from $72,000 in 1997 to
$47,000 in 1998 because less funds were available for investment during the 1997
period and interest rates were lower.
Legal fees and costs decreased 9% to $149,000 for the 1998 quarter,
compared to $163,000 in the prior period. In the 1997 period, the Company had
been involved in various appeals and hearings in connection with the opposition
by the State and others to the issuance of a drilling permit. During the 1998
period, the level of expenditures decreased.
Administrative expenses increased 20% to $124,000 in 1998 from $103,000
in the prior quarter. The primary reason for the increase was an increase in the
amount of directors' and officers' liability insurance in 1998.
Six month period ended June 30, 1998 vs. June 30, 1997
The Company incurred a loss of $605,000 for the 1998 period, compared
to a loss of $610,000 for the comparable 1997 period.
Interest income and other income decreased 36% from $155,000 in 1997 to
$99,000 in 1998 because less funds were available for investment during 1998 and
interest rates were lower.
Legal fees and costs decreased 18% to $263,000 for the 1998 period,
compared to $321,000 in the prior period. In the 1997 period, the Company had
been involved in various appeals and hearings in connection with the opposition
by the State and others to the issuance of a drilling permit. During the 1998
period, the level of expenditures decreased.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operation (Cont'd)
Administrative expenses increased 14% to $257,000 in 1998 from $226,000
in the prior period. The primary reason for the increase was an increase in the
amount of directors' and officers' liability insurance in 1998.
Shareholder communications decreased 29% from $129,000 in 1997 to
$91,000 in 1998. The cost of printing and mailing increased in 1997 because of
the size of the documents and the number of mailings compared to the 1998
period.
Exploration costs increased from $10,000 in 1997 to $13,000 in 1998 in
connection with the Company's continuing program to identify potential drilling
prospects.
PART II - OTHER INFORMATION
COASTAL CARIBBEAN OILS & MINERALS LTD.
June 30, 1998
ITEM 4 - Submission of Matters to a Vote of Security Holders
(a) On May 20, 1998, the Company held its Annual Meeting of
Shareholders.
(b) Director Nicholas B. Dill was reelected for a three year term
expiring at the 2001 Annual General Meeting. The results of the votes cast by
the Company's shareholders were as follows:
Number of Shares Voted Number of Shareholders Voting
For Withheld For Withheld
Nicholas B. Dill 33,964,680 401,022 3,012 152
(c) The firm of Ernst & Young LLP was approved as the Company's
independent auditors for the fiscal year ending December 31, 1998. The results
of the votes cast by the Company's shareholders were as follows:
Number of Shares Voted Number of Shareholders Voting
For Against Abstain For Against Abstain
34,106,848 65,892 192,962 3,043 36 85
ITEM 5 - Other Information
On April 8, 1998, a Florida Administrative Judge recommended that
Coastal Petroleum Company ("CPC") was entitled to a drilling permit with the
requirement of $225 million surety. On May 13, 1998, the Administration
Commission of the State of Florida rejected the $225 million surety and remanded
the proceedings to the Administrative Judge with instructions to recalculate the
surety amount based on a maximum oil spill using a daily flow rate of 5,984
barrels of oil and a maximum time to drill a relief well of 120 days. On July
10, 1998, the Florida Administrative Law Judge ordered that Coastal Petroleum
Company and the other parties confer on the specific issue of the 120 day period
and utilize the services of CPC's experts to provide the requested data. CPC
will appeal this order to Florida's First District Court of Appeal.
PART II - OTHER INFORMATION
COASTAL CARIBBEAN OILS & MINERALS LTD.
June 30, 1998
ITEM 6 - Exhibits and Reports on Form 8-K
On April 8, 1998, the Company filed a Current Report on Form 8-K to
report that a Florida Administrative Law Judge recommended that the Company is
entitled to an offshore drilling permit for its St. George's Island prospect,
with a recommended surety of $225 million.
On May 13, 1998, the Company filed a Current Report on Form 8-K to
report that the State of Florida Administration Commission rejected the
recommended $225 million surety amount and remanded the proceeding back to the
Division of Administrative Hearings.
On May 26, 1998, the Company filed a Current Report on Form 8-K to
report that the Florida Department of Environmental Protection refused to issue
a permit to its subsidiary, Coastal Petroleum Company ("CPC"), to drill an
offshore exploration well near St. George's Island and that CPC intended to
appeal the agency's ruling to Florida's First District Court of Appeal.
On June 29, 1998, the Company filed a Current Report on Form 8-K to
report that the U.S. Supreme Court declined to review a Florida appellate court
ruling against Coastal Petroleum in its royalty interest claim against the State
of Florida.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
Registrant
Date: July 28, 1998 By /s/ James R. Joyce
-----------------------------------
James R. Joyce
Treasurer and Chief Accounting and
Financial Officer