FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
OR
[ ] 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: 0-9500
MOUNTAINS WEST EXPLORATION, INC.
(Exact name of small business issuer as specified in its charter)
New Mexico 85-0280415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
616 CENTRAL AVE. SE. SUITE 213
ALBUQUERQUE, NEW MEXICO 87102
(Address of principal executive offices) (Zip Code)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the issuer
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 outstanding of the issuer's common stock, par value $.001
per share, at May 14, 1998, was 38,019,270 shares.
PART I
ITEM 1. FINANCIAL STATEMENTS
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED BALANCE SHEET
UNAUDITED
March 31, 1997
ASSETS
Current Assets
Cash .................................................... $ 4,044
Accounts receivable ..................................... 177,500
Due from officer ........................................ 899
Deposit ................................................. 1,500
Accrued interest receivable ............................. 11,424
-----------
Total current assets ...................................... 195,367
-----------
Furniture and equipment
Office furniture and equipment, at cost ................. 12,470
Less accumulated depreciation ........................... (10,822)
-----------
Net furniture and equipment ............................... 1,648
-----------
Oil and gas properties, using the successful
efforts method (Note 3) ................................ 4,178,838
Less accumulated depreciation,
depletion and amortization .......................... (14,779)
-----------
Net oil and gas properties ................................ 4,164,059
-----------
Other assets
Term deposit account - restricted ...................... 53,042
Note receivable, officer ............................... 100,000
Investment in partnership .............................. 15,000
Mineral interest ....................................... 50,683
-----------
Total other assets ........................................ 218,725
-----------
Total assets ................................................ $ 4,579,799
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ....................................... $ 16,002
Accrued payroll and related taxes ...................... 64,756
Accrued liabilities .................................... 38,400
Note Payable Officer ................................... 23,374
Due to affiliates ...................................... 4,081,791
Note payable ........................................... 35,000
-----------
Total Current Liabilities ................................. 4,259,323
-----------
Stockholder's Equity
Common Stock, $.001 par value, authorized:
50,000,00 shares, issued 38,103,770
shares; outstanding 38,019,270 shares ................ 38,020
Capital in excess of par value ......................... 1,617,757
Accumulated deficit ................................... (1,335,301)
-----------
Total Stockholders Equity ................................. 320,476
-----------
Total Liabilities and Stockholders Equity ................... $ 4,579,799
===========
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
Revenues
Oil and gas sales .......................... $ 4,936 $ 10,895
Lease income ............................... -- 13,655
Interest in sale of oil & gas property ..... -- --
------------ ------------
Total revenue ................................ 4,936 24,550
------------ ------------
Expenses
Production costs ........................... 1,043 4,205
Exploration costs .......................... -- --
Depreciation and depletion ................. 330 366
Consulting ................................. 714 264
General and administrative ................. 32,798 26,536
------------ ------------
Total expenses ............................... 34,885 31,371
------------ ------------
Loss from operations ......................... (29,949) (6,821)
Other income
Interest income ............................ 1,300 1,090
Interest expense ........................... (1,764) (313)
Other ...................................... (35) (230)
------------ ------------
Total other income (loss) .................... (499) 547
------------ ------------
Net earnings ................................. $ (30,448) $ (6,274)
============ ============
Earnings (loss) per common share: ............ $ 0.00 $ 0.00
============ ============
Weighted Average Number of Shares
Outstanding (Note 2) ....................... 38,019,270 37,034,270
============ ============
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
Cash Flows from Operating Activities
Cash received from customers .................. $ 4,936 $ 49,295
Cash paid to suppliers & employees ............ (14,114) (52,441)
Interest received ............................. 300 90
Interest paid ................................. (1,764) (313)
--------- ---------
Net cash used by operating activities ...... (10,642) (3,369)
--------- ---------
Cash Flows from Financing Activities
Net proceeds from officer advances ............ 11,943 --
--------- ---------
Net cash provided by financing activities .. 11,943 --
--------- ---------
Net increase (decrease) in cash .................. 1,301 (3,369)
Cash at beginning of period ...................... 2,743 38,876
--------- ---------
Cash at end of period ............................ $ 4,044 $ 35,507
========= =========
Reconciliation of Net income (loss) to
Cash Provided by Operating Activities:
Net earnings (Loss) .............................. $ (30,448) $ (6,273)
Adjustments
Depreciation, depletion and amortization ...... 330 366
Increase in prepaid expenses and
accounts receivable ........................ (2,424) (1,000)
Increase in advances, accounts payable
and accrued liabilities .................... 21,900 3,538
--------- ---------
Net Cash used by Operating Activities ............ $ (10,642) $ (3,369)
========= =========
Noncash Investing or Financing Activities:
Note issued in exchange for investment
in oil and gas property in Papua,
New Guinea: ................................ $ 191,920 $ 116,623
MOUNTAINS WEST EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The balance sheet at March 31, 1998 and statements of operations and statements
of cash flows for the three months ended March 31, 1998 and 1997 have been
prepared by the company, without audit. In the opinion of management, all
adjustments, including normal recurring adjustments necessary to present fairly
the financial position, results of operations and cash flows, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the Company's audited financial statements at
December 31, 1997. The results of operations for the three months ended March
31, 1998 are not necessarily indicative of operating results for the full year.
2. NOTES TO FINANCIAL STATEMENTS.
Net income or loss per common share has been computed based on the weighted
average number of shares outstanding during the period. Stock options issued in
1991 have not been considered as their effect would be antidilutive.
3. OIL AND GAS PROPERTIES
Capitalized costs using the successful efforts method related to the Company's
oil and gas activities as of March 31, 1997 are as follows:
Proved developed properties .. $ 14,779
Proved shut - in property .... 4,164,059
Accumulated depreciation,
depletion, amortization and
valuation allowances ...... (14,779)
-----------
Net capitalized costs ........ $ 4,164,059
===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
During the quarter ended March 31, 1998, oil and gas sales were $4,936 compared
to $10,895 for the same period in the prior year. The Company had no other
operating income during the quarter. The reduction in sales is due in part to
the natural decline in production from the Company's gas wells in the Denver
Basin which have almost reached their economic limit. A redetermination of the
interests in the coal bed methane unit in Las Animas County, Colorado where the
company has an interest in two gas wells has caused a decline in monthly
revenues to the Company. Although the monthly sales revenue has decreased, the
production lives of these wells will be extended and should be beneficial to the
Company over the life of the wells (See "Colorado "below).
The long awaited production from the SE Gobe oil field in Papua New guinea
commenced in April, 1998. Although all of the Company's revenue from that
license will be devoted to repaying the Company's debts to its partners for its
share of the costs of establishing the production, which at March 31, 1998 was
approximately $4,082,000., the debt reduction caused by this revenue stream
should greatly increase the stockholders' equity position of the Company.
Management anticipates that the production from the license will increase as
will the Company's share of the revenue from the production (See "Papua New
Guinea" below).
At the time production commenced from the property, the Company became obligated
to pay its share of all capital development costs incurred on any license in
which it holds an interest. The Company owns interests in the following
properties:
Colorado
The Company owns over 2400 acres of minerals in Las Animas county, Colorado. The
two coal bed methane gas wells discussed above are located on 240 acres of these
minerals. The Company's 1770 acre tract of the minerals were leased to a Texas
oil company however the company declined to drill the necessary wells to hold
the lease. The Company is currently considering developing these minerals itself
as funds become available.
Papua New Guinea
a. The three oil wells in which the Company has an interest have been included
in Petroleum Development License (PDL) 3. As stated earlier these oil wells
commenced production on the 17th of April, 1998. The three wells initially
produced about 12,000 barrels per day. Production is increasing daily and plans
are to have the SE Gobe oil field producing 25,000 barrels per day by mid July
1998. These wells and certain other lands included within PDL#3 have been
unitized with Chevron Oil Company's existing PDL #4 to the north. These two
partial PDLs are being developed as the Southeast Gobe Oil Field. The Company's
interest in the unitized production, after exercise by the government of its
right to acquire a 22 1/2% interest in the fields, is a net 0.8718% which will
result in an anticipated initial production to the Company's interest of
approximately 220 barrels of oil per day. The Company's expenses in this unit
were carried until the first production from PDL 3 was sold. The operator of the
field, Chevron, was able to put the Gobe Main field and the SE Gobe field on
production approximately two months ahead of schedule and approximately
$50,000,000 under budget. The costs of getting the oil from the unit to sale has
been estimated at more than $175,000,000, none of which was payable by the
Company until after the first sale of production. At that time, all of the money
realized from the sale of the oil will be devoted to repayment of the carried
cost of the project. Management estimates at the production rate of 200 barrels
per day at a price of $20 per barrel to the Company's interest will take
approximately thirty six months to pay out after production begins. Because of
the recent depressed would price for oil the payout may well be substantially
longer than anticipated.
b. PPL 189 contains approximately 480,000 acres (24,245 net to the Company's
interest). As a result of reallocation of interests, the Company's interest in
this License is 5.051%. This license has the Barikiwa shut-in gas field located
on it. The Barikiwa field has gas reserves estimated from a low of 163 billion
cubic feet to a high of 1590 billion cubic feet. Further evaluation will be made
to more precisely define the true reserves of this field. Plans to build at
least one LNG plant in Papua, New Guinea have been announced and Chevron has
announced plans to build a gas pipeline from Papua New Guinea into Northern
Australia. Either an LNG plant or the proposed pipeline should greatly increase
the value of the gas reserves at Barikiwa. The Company will have to fund its
5.051% share of the work program of this license which calls for an expenditure
of approximately $6,250,000 over a period of six years, with approximately
$56,000 of that amount to be paid during the current year. The operator, Santos,
has recently completed a seismic program over the Barikiwa Gas field. The
seismic records are now being processed and the Company is awaiting the results.
As production has commenced on the SE Gobe field, the Company will now have to
pay its full share in future development of the license.
c. PPL 190 contains approximately 460,000 acres (17,309 net to the Company's
interest) has many very prospective surface structures located on it. A seismic
line was run over the Masaka structure during 1997 with positive results. It is
anticipated that the Masaka structures will be drilled during 1998, however, a
landowner dispute has slowed progress and a definite date for the commencement
of drilling is not known at this time. A reallocation of interests has increased
the Company's interest in this license to 3.763%. As production has commenced on
the SE Gobe field, the company must fund its share of a new seismic program
which is estimated to cost approximately $1,000,000. The manager of the joint
venture will issue cash calls to each partner, who will each then pay the amount
of the stated cash call. The Iehi shut in gas field lies on this license but the
reserves are insignificant at this time. The Company will have to fund most of
the work program of the license which calls for an expenditure of $13,500,000
over the next five years. Management estimates that the Company's cost in this
new concession over the next year will be approximately $200,000.
d. PPL 203 (previously PPL 165) - Oil Search Ltd, is the operator with an 85%
ownership interest in the license. Gedd, Inc. owns 10% while the Company owns a
5% carried interest until a well is commenced on the property. A new work
program of seismic and surface mapping is to commence during the current year. A
part of the reorganization of the license, the Company received from Oil Search,
Ltd.(the operator), a payment of $177,500 in early April, 1998 as a refund for
previous work done on the license. Under the terms of the contract with the
Operator, the Company has a carried interest in the two year work program and
will not have to pay any of the costs until commencement of the first well of
production at which time the Company will pay its 5% share.
As stated, the Company faces cash calls on each of the licenses in which it has
interests, while the bulk of its revenue will be devoted to paying debt incurred
over the past two decades while production was being established on PDL#3. The
Company must find the funds to meet the cash calls through the sale of stock,
borrowings or sale of interests in its properties. No specific source of the
required funds is known at the time of this report.
The Company does not presently have the liquidity that may be necessary to meet
any call for payment of expenses and the Company has no present assurance of the
availability of any of the funds that may be needed at the time needed. The
failure of the Company to meet any cash call made on it for its share of the
expenses incurred on any concession could result it its losing its interest in
the concession.
Changes in Financial Condition
During the quarter the Company continued to experience a decline in cash
position due to the ongoing operating expenses of the Company. On April 1, 1998,
the Company received $177,500 from Oil Search Pty, Ltd. (See PPL 203 above). The
Company's total debt increased by $225,763 during the quarter as a result of
additional expenses of exploration being paid by the Company's partners. The
Company's primary liability is a continually developing carried interest in
certain New Guinea oil and gas rights. The Company's total liabilities other
than those created by this carried interest are approximately $177,532. It is
Management's belief that the Company will be able to continue to meet its
financial commitments during the remainder of the fiscal year.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than the judgment described in the Company's annual report on form 10KSB,
incorporated herein by reference, management knows of no legal proceedings or
unsatisfied judgments which have not been provided for in any court or agency to
which the Company or any of its officers or directors are or may be a party.
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS IN SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits required by Item 601 of regulation S-K.
(b) Reports on Form 8-K.
On February 6, 1998, the Company filed a form 8-K announcing the
resignation of Mr. Thad H. Turk from the Board of Directors of
Mountains West Exploration, Inc..
SIGNATURES
In accordance with section 13 to 15(d) of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Robert A. Doak, Jr. May 13, 1998
- --------------------------------------------------------
Robert A. Doak, Jr. President, Chief Executive Officer
and Chief Financial Officer