EXHIBIT 99.2
AUDITED FINANCIAL STATEMENTS OF
PANNONIAN ENERGY, INC.
FOR THE YEAR ENDED DECEMBER 31, 1999
PANNONIAN ENERGY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
C O N T E N T S
Independent Auditors' Report................................................ 3
Consolidated Balance Sheet.................................................. 4
Consolidated Statements of Operations....................................... 6
Consolidated Statements of Stockholders' Equity............................. 7
Consolidated Statements of Cash Flows....................................... 8
Notes to the Consolidated Financial Statements............................. 10
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pannonian Energy, Inc.
(A Development Stage Company)
Englewood, CO
We have audited the accompanying consolidated balance sheet of Pannonian Energy,
Inc. (a development stage company) as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended and from inception on May 21, 1998 through December 31, 1999
and 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pannonian Energy,
Inc. (a development stage company) as of December 31, 1999 and the results of
their operations and their cash flows for the year then ended and from inception
on May 21, 1998 through December 31, 1999 and 1998 in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred significant losses
since inception and has had no significant revenues. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ HJ & ASSOCIATES LLC
HJ & Associates, LLC
Salt Lake City, Utah
December 4, 2000, except for the last two paragraphs
in Note 8 as to which the date is January 31, 2001.
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Consolidated Balance Sheet
ASSETS
December 31,
1999
----------
CURRENT ASSETS
Cash $ 163,490
Prepaid expenses 37,372
----------
Total Current Assets 200,862
----------
FIXED ASSETS - NET (Notes 1 and 3) 3,045
----------
OTHER ASSETS (Note 6)
Investment in property 2,484,919
----------
Total Other Assets 2,484,919
----------
TOTAL ASSETS $2,688,826
==========
The accompanying notes are an integral part of
these consolidated financial statements.
4
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
1999
-----------
CURRENT LIABILITIES
Accounts payable $ 22,369
Accrued expenses 3,713
Notes payable - related parties (Note 4) 240,578
-----------
Total Current Liabilities 266,660
-----------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000 shares authorized at
$0.001 par value, none issued and outstanding -
Common stock, 25,000,000 shares authorized at
$0.001 par value; 7,925,000 shares issued and outstanding 7,925
Additional paid-in capital 3,157,075
Deficit accumulated during the development stage (742,834)
-----------
Total Stockholders' Equity 2,422,166
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,688,826
===========
The accompanying notes are an integral part of
these consolidated financial statements.
5
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Consolidated Statements of Operations
From Inception on
For the May 21, 1998 Through
Year Ended DECEMBER 31,
December 31, ----------------------------
1999 1998 1999
------------ -------- ----------
SALES $ - $ - $ -
COST OF SALES - - -
------------ -------- ----------
GROSS MARGIN - - -
------------ -------- ----------
OPERATING EXPENSES
Professional services 159,350 - 159,350
Depreciation and amortization 537 - 537
General and administrative 578,266 6,000 584,266
------------ -------- ----------
Total Operating Expenses 738,153 6,000 744,153
------------ -------- ----------
Loss from Operations (738,153) (6,000) (744,153)
------------ -------- ----------
OTHER INCOME (EXPENSE)
Other income 14,666 - 14,666
Interest expense (13,347) - (13,347)
------------ -------- ----------
Total Other Income (Expense) 1,319 - 1,319
------------ -------- ----------
NET LOSS $ (736,834) $(6,000) $(742,834)
============ ======== ==========
BASIC LOSS PER SHARE $ (0.11) $ (0.00)
============ ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,731,986 -
============ ========
The accompanying notes are an integral part of
these consolidated financial statements.
6
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
Deficit
Accumulated
COMMON STOCK Additional During the
------------------------- Paid-in Development
SHARES AMOUNT CAPITAL STAGE
--------- ------ ---------- ----------
Balance, May 21, 1998 (inception) - $ - $ - $ -
Net loss for the period from inception on
May 21, 1998 through December 31, 1998 - - - (6,000)
--------- ------ ---------- ----------
Balance, December 31, 1998 - - - (6,000)
Common stock issued for services at
$0.05 per share 1,000,000 1,000 49,000 -
Common stock issued for cash at an
average price of $0.31 per share 4,925,000 4,925 1,510,075 -
Common stock issued for property at
$0.60 per share 1,000,000 1,000 599,000 -
Common stock issued for debt at $1.00
per share 1,000,000 1,000 999,000 -
Net loss for the year ended
December 31, 1999 - - - (736,834)
--------- ------ ---------- ----------
Balance, December 31, 1999 7,925,000 $7,925 $3,157,075 $(742,834)
========= ====== ========== ==========
The accompanying notes are an integral part of
these consolidated financial statements.
7
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
From Inception on
For the May 21, 1998 Through
Year Ended DECEMBER 31,
December 31, ------------------------------
1999 1998 1999
------------ -------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (736,834) $(6,000) $ (742,834)
Adjustments to reconcile net loss to net cash
flows used by operating activities:
Depreciation and amortization 537 - 537
Common stock issued for services 50,000 - 50,000
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses (37,372) - (37,372)
Increase (decrease) in accounts payable 16,368 6,000 22,368
Increase (decrease) in accrued expenses 3,714 - 3,714
------------ -------- ------------
Net Cash Flows (Used) by Operating Activities (703,587) - (703,587)
------------ -------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (3,582) - (3,582)
Payment on investment in property (884,919) - (884,919)
------------ -------- ------------
Net Cash Flows (Used) by Investing Activities (888,501) - (888,501)
------------ -------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on notes payable - related parties (76,413) - (76,413)
Proceeds from sale of common stock 1,515,000 - 1,515,000
Proceeds from notes payable - related parties 316,991 - 316,991
------------ -------- ------------
Net Cash Flows Provided by Financing Activities $ 1,755,578 $ - $ 1,755,578
------------ -------- ------------
The accompanying notes are an integral part of
these consolidated financial statements.
8
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
From Inception on
For the May 21, 1998 Through
Year Ended DECEMBER 31,
December 31, ------------------------------
1999 1998 1999
------------ -------- ------------
NET INCREASE (DECREASE) IN CASH $ 163,490 $ - $ 163,490
CASH AT BEGINNING OF YEAR - - -
------------ -------- ------------
CASH AT END OF YEAR $ 163,490 $ - $ 163,490
============ ======== ============
CASH PAID DURING THE YEAR FOR:
Interest $ 11,072 $ - $ 11,072
Income taxes $ - $ - $ -
NON-CASH TRANSACTIONS
Common stock issued for services $ 50,000 $ - $ 50,000
Common stock issued for property $ 600,000 $ - $ 600,000
Common stock issued for notes payable $ 1,000,000 $ - $ 1,000,000
Note payable issued for property $ 1,000,000 $ - $ 1,000,000
The accompanying notes are an integral part of
these consolidated financial statements.
9
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The consolidated financial statements presented are those of
Pannonian Energy, Inc. (the Company), Warbonnet Partners, LLC
(Warbonnet), and Pinedale Partners, LLC (Pinedale). The Company was
incorporated in the State of Delaware on May 21, 1998 for any and
all lawful purposes for which corporations may be organized under
the laws of the State of Delaware.
Both Warbonnet and Pinedale were organized in the State of Colorado
on August 9, 1999 to engage in activities associated with the
exploration and production of oil and gas.
b. Accounting Methods
The Company's consolidated financial statements are prepared using
the accrual method of accounting. The Company has elected a
calendar year end.
Oil and Gas Properties -
The full cost method is used in accounting for oil and gas
properties. Accordingly, all costs associated with acquisition,
exploration, and development of oil and gas reserves, including
directly related overhead costs, are capitalized. In addition,
depreciation on property and equipment used in oil and gas
exploration and interest costs incurred with respect to financing
oil and gas acquisition, exploration and development activities are
capitalized in accordance with full cost accounting. All
capitalized costs of proved oil and gas properties subject to
amortization will begin to be amortized once production commences.
Investments in unproved properties and major development projects
not subject to amortization are not amortized until proved reserves
associated with the projects can be determined or until impairment
occurs.
c. Basic Loss Per Share
The computation of basic loss per share of common stock is based on
the weighted average number of shares outstanding during the period
of the financial statements as follows:
For the Year Ended For the Period Ended
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------------------- --------------------------------------------
Loss Shares Per-Share Loss Shares Per-Share
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
------------- --------------- ------------ ------------- --------------- -----------
Net Loss $(736,834) 6,731,986 $(0.11) $(6,000) - $(0.00)
Fully diluted loss per share is not presented as any common stock
equivalents are antidilutive in nature.
10
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. Provision for Taxes
No provision for taxes has been made due to cumulative operating
losses at December 31, 1999. The Company has net operating loss
carryforwards of approximately $740,000 which will expire in 2019.
The net operating losses are the only significant component of the
deferred tax asset and liability. No tax benefit has been reported
in the financial statements and the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same
amount.
e. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
f. Fixed Assets
Fixed assets are stated at cost. Depreciation of fixed assets is
computed using the straight-line method over the estimated useful
lives of the related assets, primarily five years.
g. Principles of Consolidation
The consolidated financial statements include those of Pannonian
Energy, Inc. (the Company) and its wholly-owned subsidiaries,
Warbonnet Partners, LLC and Pinedale Partners, LLC. All significant
intercompany accounts have been eliminated.
h. Concentrations of Credit Risk
CASH
The Company has, in its bank account, funds in excess of the
$100,000 that is federally insured. In the event of the failure of
the bank, the Company would sustain a loss of funds that exceed
$100,000.
At December 31, 1999, the amount of funds in a single account that
exceeded the federally insured limit was $63,490.
i. Estimates
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
11
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
j. Revenue Recognition
The Company currently has no source of revenues. Revenue
recognition policies will be determined when principal operations
begin.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going
concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.
However, the Company does not have significant cash or other
material assets, nor does it have an established source of revenues
sufficient to cover its operating costs and to allow it to continue
as a going concern. It is the intent of the Company to generate
cash flow through equity financing and an industry partner.
NOTE 3 - FIXED ASSETS
Fixed assets consisted of the following: 1999
-------
Office equipment $3,582
Accumulated depreciation (537)
-------
$3,045
=======
Total depreciation expense for the year ended December 31, 1999 was
$537.
NOTE 4 - NOTES PAYABLE - RELATED PARTIES
Notes payable consisted of the following:
1999
Notes Payable - Related Parties
Note payable to an officer, unsecured, at 6.5% per annum,
payable on demand. $ 34,096
Note payable to a shareholder, unsecured, at 6.5% per
annum, due on December 31, 2000. 206,482
-----------
Total Notes Payable - Related Parties 240,578
Less current portion (240,578)
-----------
Long-term notes payable - related parties -
===========
Principal maturities are as follows:
2000 $240,578
2001 -
2002 and thereafter -
--------
$240,578
========
12
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 5 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENT
The Company is leasing its office space on a month-to-month basis.
Rent expense for the year ended December 31, 1999 was $45,216.
NOTE 6 - OTHER ASSETS
On February 15, 1999, Pannonian Energy Inc. entered into an Option
and Purchase Agreement with Retamco Operating Company. The
Agreement, in return for $1,000,000 cash and 1,000,000 shares of
common stock consideration (the shares were valued at the present
value, discounted at 10%, of the rights acquired based on an
independent study less the $1,000,000 paid in cash or $0.60 per
share), entitled Pannonian Energy to a 100% working interest and
80% net revenue interest in two (2) federal oil and gas leases
(approximately 2,140 gross acres) within the Riverbend Prospect
located in Uintah County, Utah. Additionally, Pannonian was granted
an option for up to five (5) years to purchase an additional
200,000+ acres of oil and gas leases located in Utah and Colorado
at a pre-determined price of $100 per net acre in 25,000 acre
blocks to be selected and acquired by Pannonian per an agreed to
schedule. The option would remain in effect as long as Pannonian
paid annual lease rentals ($1.00 to $1.50 per acre) and acquired
additional leasehold per the agreed to schedule that required the
first acreage acquisition to occur by November 15, 1999 and to be
tested every February 12 and November 15 thereafter until all of
the leasehold was acquired or the option was allowed to expire.
Marc Bruner paid Retamco $1,000,000 on behalf of Pannonian and
entered into a Note with Pannonian entitling Marc Bruner the right
to repayment plus interest or the right to convert the Note into
1,000,000 common shares of Pannonian energy Inc. Bruner
concurrently converted the note into 1,000,000 Pannonian common
shares.
On March 11, 1999, Pannonian Energy Inc. entered into an amended
Agreement that was modified on April 30, 1999. This agreement
entitled Pannonian to select an additional 35,000 net acres during
the next twenty-four (24) months, in return for 1,750,000 shares of
common stock valued at $2.00 per share (the same price as the
on-going private placement under which 725,000 units were sold).
All other acreage acquisitions required under the previous
agreement were suspended during this twenty-four (24) month period.
Concurrent with this transaction, March Bruner purchased from
Retamco, its 1,000,000 common shares granted under the original
Agreement. The terms and conditions of Marc Bruner's acquisition of
these 1,000,000 common shares are not known by Pannonian.
On February 1, 2000, and effective December 31, 1999, Pannonian and
Retamco entered into a new "Umbrella Agreement" that terminated the
original and all amended, modified, and restated option and
purchase agreements. Under the new final terms of this Umbrella
Agreement, Pannonian relinquished its option to purchase additional
lands from Retamco and assigned to Retamco 100% of its working
interest in six (6) recently acquired leases, approximately 2,900
gross acres. Retamco released Pannonian (after February 29, 2000)
from the requirement to pay 90% to 95% of Retamco's lease rental
payments and Retamco returned the 1,750,000 common Pannonian
shares. Retamco assigned 100% of its working interest in the
original 2,140 Riverbend Prospect acres and 100% working interest
in approximately 320 gross acres of a recently acquired Riverbend
lease and a 50% working in seven (7) prospects covering
approximately 14,597 gross acres located in Utah and Colorado.
13
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 6 - OTHER ASSETS (Continued)
During the term of the Agreement, Pannonian paid approximately
$333,365.72 for lease rentals through December 31, 1999 and $532.00
for lease rentals through February 29, 2000.
Subsequently, Sproule and Associates, an independent appraisal
company, completed a Pannonian Reserve Report assigning net proven
reserves of 2246.4 MMcf natural gas and 6,600 Bbls oil per SEC
guidelines to six (6) potential locations covering 360 gross acres
on three (3) of the seven prospects. The net present value,
discounted at ten percent (10%) of these proven reserves using oil
and gas prices at an effective date of December 31, 1999 is
$1,694,300. Sproule assigned no proven reserve value to the
remaining Pannonian leasehold acreage; however, such acreage does
have significant leasehold value.
NOTE 7 - COMMON STOCK AND DILUTIVE INSTRUMENTS
In February 1999, the Company completed an initial private
placement by issuing 4,200,000 shares of its common stock in
exchange for cash of $210,000 or $0.05 per share. In conjunction
with the stock offering, each share of common stock had a warrant
attached exercisable at $1.00 per share.
In June through August 1999, the Company completed an additional
private placement by selling 725,000 shares of its common stock for
cash of $1,305,000 or $1.80 per share. The costs associated with
this offering were negligible. In conjunction with the stock
offering, each share of common stock had a warrant attached
exercisable at $2.00 per share.
The following is a schedule of outstanding warrants as of December
31, 1999:
Date of Expiration Exercise Warrants Warrants
ISSUE DATE PRICE ISSUED OUTSTANDING
-------------------------- ------------------ ------------------ ----------------- ------------------
February 1999 February 2001 1.00 4,200,000 4,200,000
June 1999 June 2001 2.00 125,000 125,000
July 1999 July 2001 2.00 250,000 250,000
August 1999 August 2001 2.00 350,000 350,000
--------- ---------
4,925,000 4,925,000
========= =========
Each warrant was issued at an exercise price above the cash price
of the stock on the date of issuance.
14
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 8 - SUBSEQUENT EVENTS
On January 18, 2000, the Company organized another entity known as
Pannonian International, Ltd. (Pannonian). Pannonian was organized
in the State of Colorado to hold international assets in Germany
and Romania.
On May 1, 2000, the Company entered a Farmout Agreement with
Medallion Exploration for two blocks of land containing three
federal oil and gas leases in Uinta County, Utah. The Company paid
$50,000 for a 75% interest in the leases and the initial well is
expected to be drilled by March 1, 2001.
On September 12, 2000, the Company entered into a Farmout Agreement
with Shenandoah Operating Company, LLC (SOC) and Pendragon Energy
Partners (PEP). SOC and PEP own certain undivided working interests
in several oil and gas leases located on approximately 25,000 acres
in Uinta County, Utah. The Company has agreed to earn a 75% working
interest in these leases by exploring for oil and gas. The Company
agreed to commence, or cause to be commenced, the actual drilling
of a test well located on these lands on or before March 31, 2001.
If the Company fails to commence or cause to be commenced actual
drilling operations of the test well prior to March 31, 2001, the
Company agrees to pay SOL and PEP a total of $250,000 for
non-performance. Payment of the non-performance penalty grants the
Company another six months to commence drilling of the test well.
In February 2000, the Company entered into agreements with Belport
Oil and Gas (Belport) by acquiring a 75% interest in 12 wellbores
plus approximately 5,000 acres of coalbed methane lease rights. In
exchange for the interest in the rights, the Company assumed a
$225,000 mortgage note on the properties and issued a note to
Belport in the amount of $481,917. The President of the Company
(Erickson) agreed to assume the above obligations should the
Company fail to be able to perform. Subsequent to this agreement, a
joint venture including the Company, Belport, Erickson and other
unrelated parties have acquired approximately 25,000 acres of
additional lease rights and are in the process of releasing the
Company from its mortgage and note obligation mentioned above.
During 2000, the Company borrowed $635,524 from related parties and
paid back $258,410 of the principal balance during the year.
Interest is due at rates ranging from 5% to 12%. The Company also
borrowed $100,000 from unrelated parties during 2000 with interest
at 12%.
On December 18, 2000, the Company entered into an Acquisition
Agreement with Phillips Petroleum Company (Phillips). Phillips paid
the Company $1,000,000 for the exclusive right to earn an undivided
80% interest in the existing leases and contracts (limited in depth
from the base of the Wasatch Formation to all depths on lands
subject to the existing Pannonian leases, Medallion Farmout and
proposed Yates and Inland Resources Farmout in Townships 9 and 10
South, Ranges 19E) entered into with Medallion Exploration,
Shenandoah Operating Company and Pendragon Energy Partners and two
additional proposed farmout agreements.
15
PANNONIAN ENERGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 8 - SUBSEQUENT EVENTS (Continued)
On January 31, 2001, the Company entered into an Agreement and Plan
or Reorganization whereby the Company would become a wholly-owned
subsidiary of San Joaquin Resources, Inc. (SJRI). The shareholders
of Pannonian Energy, Inc. (Pannonian) will receive 1.7414 shares of
SJRI for each share of Pannonian's common stock. In addition, each
Pannonian $1.00 warrant holder will receive the equivalent of 0.01
shares of Pannonian common stock and each $2.00 warrant holder will
receive the equivalent of 0.10 shares of Pannonian common stock.
These Pannonian shares will also be converted to SJRI stock at the
same conversion equivalent. In addition, SJRI will change its name
to Gasco Energy, Inc. In conjunction with the merger, Pannonian
must transfer all of its non-Riverbend assets and all liabilities
other than an agreed amount of Riverbend-associated liabilities to
one or more new companies prior to the effective time of the
merger. Prior to closing the merger, Pannonian will dividend to its
shareholders the shares of the new company(ies) to which it
transfers its non-Riverbend assets and liabilities. This split up
and dividend action will allow Pannonian shareholders to continue
to own interest in all of the current Pannonian assets and
liabilities, and also obtain an ownership interest in the San
Joaquin assets.
16
PANNONIAN ENERGY, INC.
(A Development Stage Company)
S.F.A.S. 69 Supplemental Disclosures
(Unaudited)
December 31, 1999
S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES
(1) Capitalized Costs Relating to
Oil and Gas Producing Activities
December 31,
1999
------------
Proved oil and gas producing properties and related
lease and well equipment 1,689,610
Accumulated depreciation and depletion -
---------
Net Capitalized Costs 1,689,610
=========
(2) Costs Incurred in Oil and Gas Property
Acquisition, Exploration, and Development Activities
For the Years Ended
DECEMBER 31,
-------------------------
1999 1998
---------- -----
Acquisition of Properties
Proved $ - $ -
Unproved 1,757,914 -
Exploration Costs 113,434 -
Development Costs - -
The Company does not have any investments accounted for by the
equity method.
(3) Results of Operations for
Producing Activities
For the Years Ended
DECEMBER 31,
---------------
1999 1998
---- ----
Sales $ - $ -
Production costs - -
Depreciation and depletion - -
---- ----
Results of operations for producing activities
(excluding corporate overhead and interest costs) $ - $ -
==== ====
17
PANNONIAN ENERGY, INC.
(A Development Stage Company)
S.F.A.S. 69 Supplemental Disclosures
(Unaudited)
December 31, 1999
S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (CONTINUED)
(4) Reserve Quantity Information
Oil Gas
BBL MCF
----- ---------
Proved developed and undeveloped reserves:
Balance, December 31, 1998 - -
Acquisition of proved reserves 6,600 2,246,400
Production - -
----- ---------
Balance, December 31, 1999 6,600 2,246,400
===== =========
Proved developed reserves:
Beginning of the year ended December 31, 1999 - -
End of the year ended December 31, 1999 6,600 2,246,400
During the year ended December 31, 1999, the Company had reserve
studies and estimates prepared on the various properties acquired
and developed. The difficulties and uncertainties involved in
estimating proved oil and gas reserves makes comparisons between
companies difficult. Estimation of reserve quantities is subject to
wide fluctuations because it is dependent on judgmental
interpretation of geological and geophysical data.
(5) Standardized Measure of Discounted
Future Net Cash Flows Relating to
Proved Oil and Gas Reserves
at December 31, 1999
Pannonian
Energy, Inc.
---------
Future cash inflows 5,113,005
Future production and development costs 1,914,537
Future net inflows before income taxes 3,198,468
Future income tax expense 1,177,036
Future net cash flows 2,021,432
10% annual discount for estimated timing of cash flows 1,070,812
---------
Standardized measure of discounted future net cash flows 950,620
=========
18
PANNONIAN ENERGY, INC.
(A Development Stage Company)
S.F.A.S. 69 Supplemental Disclosures
(Unaudited)
December 31, 1999
S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (CONTINUED)
The above schedules relating to proved oil and gas reserves,
standardized measure of discounted future net cash flows and
changes in the standardized measure of discounted future net cash
flows have their foundation in engineering estimates of future net
revenues that are derived from proved reserves and prepared using
the prevailing economic conditions. These reserve estimates are
made from evaluations conducted by independent geologists, of such
properties and will be periodically reviewed based upon updated
geological and production date. Estimates of proved reserves are
inherently imprecise.
Subsequent development and production of the Company's reserves
will necessitate revising the present estimates. In addition,
information provided in the above schedules does not provide
definitive information as the results of any particular year but,
rather, helps explain and demonstrate the impact of major factors
affecting the Company's oil and gas producing activities.
Therefore, the Company suggests that all of the aforementioned
factors concerning assumptions and concepts should be taken into
consideration when reviewing and analyzing this information.
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