UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the transition period from to.
Commission File No. 1-6336
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Petrominerals Corporation
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
95-2573652
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(I.R.S. Employer Identification No.)
27241 Burbank, Foothill Ranch, California 92610-2500
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(Address of principal executive offices)
(949) 588-2645
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(Registrant's telephone number, including area code)
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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.
[ ] [X]
No Yes
The number of shares of Registrant's common stock outstanding at June 30, 2001
was 1,059,404.
PETROMINERALS CORPORATION
INDEX
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets at June 30, 2001 and December 31, 2000 1
Statements of Operations for the Three and Six Months
Ended June 30, 2001 and 2000 2
Statements of Cash Flows for the Six Months Ended
June 30, 2001 and 2000 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 5
PART II - OTHER INFORMATION 7
SIGNATURES 8
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
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PETROMINERALS CORPORATION
BALANCE SHEETS
(Dollars in thousands, except par value data)
June 30, December 31,
2001 2000
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(Unaudited) (Audited)
ASSETS
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Current Assets
Cash and cash equivalents $ 1,602 $ 1,787
Accounts receivable, net 36 64
Prepaid expenses 19 30
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Total Current Assets 1,657 1,881
Restricted Cash 25 25
Property and Equipment, net (including oil and
gas properties accounted for on the successful
efforts method) 380 379
Notes Receivable and Other Assets 94 25
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Total Assets $ 2,156 $ 2,310
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Accounts payable $ 76 $ 13
Accrued liabilities 9 3
Royalties payable 11 11
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Total Current Liabilities 96 27
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Stockholders' Equity
Preferred stock:
$.10 par value, 2,900,000 shares authorized;
no shares issued and outstanding - -
Common stock:
$.80 par value, 20,000,000 shares authorized;
1,059,404 shares issued and outstanding at
June 30, 2001 and December 31, 2000, respectively 848 848
Capital in excess of par value 563 563
Retained earnings 649 872
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Total Stockholders' Equity 2,060 2,283
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Total Liabilities and Stockholders' Equity $ 2,156 $ 2,310
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1
See accompanying notes to financial statements.
PETROMINERALS CORPORATION
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
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2001 2000 2001 2000
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Revenues
Oil and gas $ 79 $ 82 $ 160 $ 172
Other income 77 41 151 67
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Total Revenues 156 123 311 239
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Costs and Expenses
Oil and gas 134 114 256 198
Depreciation, depletion
and amortization 1 1 2 2
General and administrative 137 119 275 239
Other expense 1 3 1 7
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Total Costs and Expenses 273 237 534 446
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Net Loss $ (117) $ (114) $ (223) $ (207)
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Net loss per share $(0.11) $(0.11) $(0.21) $(0.20)
======= ======= ======= =======
Weighted average common
shares outstanding 1,059 1,059 1,059 1,059
======= ======= ======= =======
2
See accompanying notes to financial statements.
PETROMINERALS CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
For the Six Months Ended
June 30,
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2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (223) $ (207)
Adjustments to reconcile net loss
to net cash used from operating activities:
Depreciation, depletion and amortization 2 2
Changes in operating working capital:
(Increase) Decrease in accounts receivable 28 (8)
(Increase) Decrease in prepaid 11 9
(Decrease) Increase in accounts payable 63 (81)
(Decrease) Increase in accrued liabilities 6 -
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Net Cash Used by Operating Activities (113) (285)
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (3) (171)
Collection from notes receivable - 153
Purchase of partnership interest (69) -
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Net Cash Used by Investing Activities (72) (18)
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Net Decrease in Cash and Cash Equivalents (185) (303)
Cash and Cash Equivalents at beginning of period 1,812 2,153
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Cash and Cash Equivalents at end of period $1,627 $1,850
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3
See accompanying notes to financial statements.
PETROMINERALS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 2001 AND 2000
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
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The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods. The results of operations for the
six month period ended June 30, 2001 are not necessarily indicative of the
results to be expected for the full year.
The accompanying financial statements do not include footnotes and
certain financial presentations normally required under generally accepted
accounting principles; and, therefore, should be read in conjunction with the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2000.
Certain reclassifications have been made to the 2000 financial statements to
conform to the presentation used in 2001.
NOTE 2 - PER SHARE COMPUTATIONS
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Per share computations are based upon the weighted average number of common
shares outstanding during each year. Common stock equivalents are not included
in the computations since their effect would be anti-dilutive.
4
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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FINANCIAL CONDITION
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As discussed in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2000, the Company had sold substantially all of its oil and gas
properties in 1998 to an unrelated party. The Company did retain an interest in
two small oil properties and has subsequently completed an acquisition of a 25%
interest in a Wyoming gas field. In addition, Petrominerals disposed of its
wholly owned subsidiary Hydro-Test International, Inc. (Hydro-Test) a New Mexico
Corporation acquired in 1993, through a voluntary petition for Chapter 7
bankruptcy on December 20, 2000. As a result of the higher commodity prices,
net cash flow increased from a negative cash flow of approximately $(303,000)
for the first six months of 2000 to a negative cash flow of approximately
$(185,000) for the same period in 2001. The current low level of cash flow is
mainly resulting from normal general and administrative costs while the Company
continues to review acquisition and merger opportunities.
Six months ended June 30, 2001 as compared with the six months ended June 30,
- --------------------------------------------------------------------------------
2000
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Oil prices in the first half of 2001 slightly decreased from those received in
the first half of 2000, the Company has recorded oil and gas sales revenues of
$160,000 for the six months ended June 30, 2001 versus $172,000 for the same
period in 2000. However, Petrominerals realized other income of approximately
$103,000 for production payments received in the first half of 2001 related to
the sale of oil and gas properties in 1998 (see 10-KSB for detail). As a result,
the Company has recorded total revenues of $311,000 for the six months ended
June 30, 2001 versus $239,000 for the same period in 2000. Net realized oil
prices decreased from $25.11 per barrel for the six months ended June 30, 2000
to $19.25 for the same period in 2001. Operating expenses were $256,000 for the
six months ended June 30, 2001 versus $198,000 for the same period in 2000.
General and administrative expenses increased to $275,000 for the six months
ended June 30, 2001 versus $239,000 for the same period in 2000. As a result, a
net loss increased from $207,000 for the first half of 2000 to $223,000 for the
same period in 2001.
BUSINESS REVIEW
Oil and Gas Segment
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As discussed in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2000, the Company had sold substantially all of its oil and gas
properties in 1998 to an unrelated party. In 1999, the Company initiated a
process to use the proceeds to either purchase additional oil and gas producing
assets or merge with another company. As a result of this process the Company
completed the acquisition of a 25% interest in the Smith Ranch natural gas field
located in southwest Wyoming for approximately $102,000 in cash in September
1999. In addition to reviewing merger alternatives, management is currently
focusing its efforts on utilizing its cash balance for the acquisition of
additional oil and gas producing properties.
Wyoming Venture
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On September 20, 1999, the Company completed the acquisition of a 25% interest
in the Smith Ranch natural gas field located in southwest Wyoming. The Company
has current production from three active gas wells, the Balta # 1 a, the
Government Clark # 3-12, and the South Baggs # 9-a, which are now producing
between 450 to 500 thousand cubic feet per day. The Company participated in the
drilling of an additional gas well in the 3rd quarter of 2000 and that well was
completed in the Lewis Sandstone interval. Due to completion problems, the well
was re-completed to an Upper Fort Union coal interval. Hydraulic fracturing was
then accomplished to stimulate production and a pumping unit was placed on the
well last week and is making gas but is still being tested. This well is named
the Blackstock # 1. The Company then drilled the Huckie # 1. This well
originally targeted the Lewis Sandstone and was intended to collect information
on the Fort Union coal interval. The Company obtained information for its
reservoir analysis on the coalbed methane potential and then tested the Lance
and Fort Union coal. The Company is now waiting for evaluation before
re-completion in the Fort Union coal at 2800 feet. The Company has four (4)
additional well bores to be used for re-completion in the Fort Union coal
interval at approximately 2800 feet and plans to continue its coalbed
development as soon as analysis on the wells drilled into the coalbed interval
has been completed.
5
Santa Clarita Area
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As a result of the 1998 sale, the Company retained a 53% working interest in the
Castaic Hills Unit, a 100% working interest in a nearby oil well and an 83.3%
working interest in 2 producing oil wells in the nearby Hasley Canyon field.
Current net production from the 11 active wells on these leases is approximately
40 barrels per day (bopd). With oil prices at historically high levels, the
operator has initiated a program of returning wells to production and
enhancement of the water disposal activities.
In addition to the retained working interest, the Company reserved a production
payment which was reserved for, and due to uncertainty over realization, and
currently has $0 carrying value. Under the purchase and sale agreement, this
payment is paid in installments in any month which certain posted prices for oil
produced exceeds $13.50 per barrel. The monthly payment is equal to one-half of
the difference between the weighted average posted price and $13.50, multiplied
by the number of barrels produced. Posted prices for the first half averaged
$20.87 per barrel. Revenue from this note was approximately $103,000 and is
reflected in the statements of operations as other income.
Hillcrest Beverly Oil Corporation Acquisition
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On March 10, 2000, the Company signed a non-binding letter of intent to purchase
100% of the outstanding stock of Hillcrest Beverly Oil Corporation (HBOC) from a
private Nevada corporation. Subsequent to the end of the second quarter, the
Company notified the seller that it would not continue its pursuit of this
acquisition because the seller was unable to fulfill certain obligations and
representations. (See Legal Proceedings, Item 1).
6
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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The Company is not a party to nor is its property the subject of any material
legal proceedings other than ordinary routine litigation incidental to its
business, or which is covered by insurance, except as previously disclosed in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000.
ITEM 2. CHANGES IN SECURITIES
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None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
ITEM 5. OTHER INFORMATION
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None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits - none
(b) Reports on Form 8-K - none
7
SIGNATURES
Pursuant to the requirement 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.
PETROMINERALS CORPORATION
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(Registrant)
/s/ Morris V. Hodges
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Morris V. Hodges
President, CEO & Chief Financial Officer