Attached files
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EX-31.1 - EXHIBIT 31.1 - AMERICAN OIL & GAS INC | c02372exv31w1.htm |
EX-31.2 - EXHIBIT 31.2 - AMERICAN OIL & GAS INC | c02372exv31w2.htm |
EX-10.(I) - EXHIBIT 10(I) - AMERICAN OIL & GAS INC | c02372exv10wxiy.htm |
Table of Contents
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2010
OR
o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 1-31900
AMERICAN OIL & GAS INC.
(Exact name of registrant as specified in its charter)
Nevada | 88-0451554 | |
(State or jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1050 17th Street, Suite 2400, Denver, CO | 80265 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code (303) 991-0173
Indicate by check mark whether the issuer (i) 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 registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o {Files Not
required}.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer, smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o* | Smaller reporting company þ | |||
(*Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common equity as of
the latest practicable date:
The total shares of $.001 Par Value Common Stock outstanding at June 7, 2010 were 60,814,656.
Table of Contents
EXPLANATORY NOTES
American Oil & Gas Inc. (the Company, we, us or our) is filing this Amendment No. 1 on
Form 10-Q/A (this Amendment) to amend its Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2010, filed with the Securities and Exchange Commission (the SEC) on May 17, 2010
(the Original 10-Q). This Amendment No. 1 makes the following changes to the Original 10-Q:
1. | We amend the cover to classify the Company as a smaller reporting company rather than
a non-accelerated company. |
||
2. | We add to Item 6s list of exhibits the exhibit 10(i) Asset Sales Agreement dated March
19, 2010 for the property sale closed March 31, 2010, between American Oil & Gas Inc and
North Finn LLC (the Sellers) and Chesapeake AEZ Exploration, LLC (the Buyer). There is no
affiliation between us and the Buyer. |
||
3. | We include Exhibit 10(i) in this Amendment No. 1. |
||
4. | We added to Item 2s first sentence the words from Chesapeake AEZ Exploration, LLC,
which is a unit of publicly held Chesapeake Energy Corporation. |
||
5. | In Item 2 Managements Discussion and Analysis of Financial Condition and Results of
Operations, of the Original 10-Q, we had included a discussion of pro-forma revenues and
expenses as if the properties that were sold on March 31, 2010 had instead been sold on
January 1, 2010 or on January 1, 2009. In this Amendment, we add after that discussion
three paragraphs on pro forma net income and earnings per share. |
||
6. | We update Item 6s list of exhibits to include the certifications specified in Rule
13a-14(a) under the Securities Exchange Act of 1934 required to be filed with this
Amendment. |
Except for the changes listed above, this Amendment No. 1 makes no other changes to the
Original 10-Q. This Amendment No. 1 does not reflect events occurring after the filing of the
Original 10-Q or modify or update those disclosures affected by subsequent events.
The aggregate market value of our common stock held by non-affiliates on June 30, 2009 was
$31,658,346 when our common stock closed at $1.00 per share. Because such aggregate market value
was below $50,000,000 on June 30, 2009, we qualify as a smaller reporting company for the filing of
quarterly reports on Form 10-Q for the quarterly periods ending March 31, June 30 and September 30,
2010.
Chesapeake AEZ Exploration LLC is an affiliate of Chesapeake Exploration LLC, the party
originally named in our Form 8-K filed February 26, 2010 as the buyer in the letter of intent for
the sale of the properties. Both companies are units of publicly held Chesapeake Energy
Corporation.
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AMERICAN OIL & GAS INC.
FORM 10-Q
INDEX
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION |
||||||||
4 | ||||||||
7 | ||||||||
7 | ||||||||
Exhibit 10(i) | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 |
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Table of Contents
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On March 31, 2010, we sold all of our oil and gas interests in the Fetter and Krejci projects
located in the Power River Basin, Wyoming and received approximately $46.2 million in sales
proceeds from Chesapeake AEZ Exploration, LLC, which is a unit of publicly held Chesapeake Energy
Corporation. Our primary focus area is our Goliath Bakken and Three Forks focused project located
in the Williston Basin, North Dakota where we control approximately 68,500 net acres.
The Williston Basin has become one of the most actively drilled basins in the continental
United States. Recent advancements in drilling, completion and stimulation technologies used by
other operators have resulted in commercially successful Bakken and Three Forks wells. We have
recently commenced drilling operations that utilize these advanced technologies.
In December 2009, we commenced drilling the Tong Trust 1-20H Bakken well pursuant to a
participation agreement with Halliburton Energy Services, Inc. (Halliburton). Halliburton paid
us approximately $1.1 million in cash and paid 100% of our share of costs to drill and complete the
Tong Trust 1-15H well. In return, Halliburton earned a 25% working interest in approximately 30,000
of our net acres in the eastern portion of our Goliath project, resulting in our current ownership
in the Goliath project area of approximately 68,500 net acres. We now own a 27.1% working interest
and an approximate 21.7% net revenue interest in the Tong Trust well. In mid-March 2010, the Tong
Trust well was placed on production at an initial 24 hour production rate of 1,421 barrels of oil
equivalent (BOE) per day (1,114 barrels of oil and 1.84 MMcf of natural gas).
In February 2010, we commenced drilling the Ron Viall 1-25H Bakken well at Goliath and in
mid-May, this well was placed on production at an initial 24 hour production rate of 2,844 BOE
(1,981 barrels of oil and 5.2 MMcf of natural gas). This well was drilled outside of the area of
mutual interest with Halliburton. We own a 95% working interest and an approximate 76% net revenue
interest in this well.
We now have a two-rig continual drilling program for 2010. Ensign rig 24 is currently
drilling the Bergstrom 15-23H Bakken well (95% WI) located in T156N-R98W Sections 23 and 14,
Williams County, and Nabors rig 486 is drilling the Johnson 15-35H Bakken well (approximate 83%
WI), located in T156N-R98W Sections 35 and 26, Williams County. Including wells already drilled,
we expect to drill a total of ten to twelve gross (seven to nine net) wells during 2010 and expect
that at least one of these wells will target the Three Forks formation.
We are in the process of evaluating the productive potential of another area located in the
Rocky Mountain region that we call our Bigfoot project. This is a shallow natural gas project
where we currently control approximately 213,000 gross (131,000 net) acres. We are primarily
targeting a formation that is less that 2,000 deep and have drilled test wells for less than
$100,000 per well. During 2010, we expect to continue to drill test wells as we evaluate the
commercial viability of this area.
Results of Operations
The following discussion should be read in conjunction with the audited financial statements
and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31,
2009. It also should be read in conjunction with the financial statements and notes thereto
included in this report.
The Quarter Ended March 31, 2010 Compared with the Quarter Ended March 31, 2009
For the quarter ended March 31, 2010, we recorded net income of $28,034,714 ($0.49 per share,
basic and $0.46 per share, diluted), as compared to a net loss attributable to common stockholders
of $3,891,363 ($0.08 loss per common share, basic and diluted) for the quarter ended March 31,
2009. The $32 million increase in net income is primarily due to a $36.4 million pre-tax gain on
the sale of substantially all of our Wyoming oil and gas interests on March 31, 2010. The increase
in net income is also attributable in part to an $8.3 million change in deferred tax asset
valuation allowances, with a $7 million reduction in valuation allowance for the 2010 quarter
compared with a $1.2 million increase in valuation allowance in the 2009 quarter. There was no
impairment
expense in the 2010 quarter compared with a $2,100,000 impairment in the 2009 quarter. Oil
production and oil and gas prices were significantly greater in the 2010 period compared with the
2009 period as shown in the table below.
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Table of Contents
For the quarter ended March 31, 2010, we recorded total oil and gas revenues of $859,971
compared with $305,674 for the quarter ended March 31, 2009. The $554,297 increase from the 2009
quarter is attributable to a 107% increase in oil production and significantly higher oil and gas
prices. Oil and gas sales and production costs and other components of income from operations are
summarized in the following table:
Three months ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
Oil sold (barrels) |
7,820 | 3,778 | ||||||
Average oil price |
$ | 71.14 | $ | 33.83 | ||||
Oil revenue |
$ | 556,342 | $ | 127,809 | ||||
Gas sold (mcf) |
45,490 | 51,414 | ||||||
Average gas price |
$ | 6.67 | $ | 3.46 | ||||
Gas revenue |
$ | 303,629 | $ | 177,865 | ||||
Total oil and gas revenues |
$ | 859,971 | $ | 305,674 | ||||
Less lease operating expenses |
(241,409 | ) | (299,675 | ) | ||||
Less oil & gas amortization expense |
(246,000 | ) | (113,000 | ) | ||||
Less accretion of asset retirement obligation |
(10,213 | ) | (9,653 | ) | ||||
Less impairment of oil and gas assets |
| (2,100,000 | ) | |||||
Plus gain on sale of oil and gas properties |
36,400,000 | | ||||||
Income (loss) from oil & gas operations |
36,762,349 | (2,216,654 | ) | |||||
Less depreciation of office facilities |
(19,701 | ) | (19,143 | ) | ||||
Less amortization of other intangible asset |
(45,000 | ) | (45,000 | ) | ||||
Less general and administrative expenses |
(2,002,729 | ) | (1,631,546 | ) | ||||
Income (loss) from operations |
$ | 34,694,919 | $ | (3,912,343 | ) | |||
Total barrels of oil equivalent (boe) sold |
15,402 | 12,347 | ||||||
Revenue per boe sold |
$ | 55.84 | $ | 24.76 | ||||
Lease operating expense per boe sold |
$ | 15.67 | $ | 24.27 | ||||
Amortization expense per boe sold |
$ | 15.97 | $ | 9.15 |
Both the 2010 quarter and the 2009 quarter results summarized above include the revenues and
lease operating expense of the Powder River Basin properties sold on March 31, 2010. Excluding the
revenues and lease operating expense of the sold properties, the quarterly revenues and lease
operating expenses would have been as follows:
Three months ended | ||||||||
Pro Forma Revenues and Expenses | March 31, | |||||||
(excluding properties sold on 3/31/10) | 2010 | 2009 | ||||||
Oil sold (barrels) |
3,553 | 1,875 | ||||||
Average oil price |
$ | 73.64 | $ | 32.34 | ||||
Oil revenue |
$ | 261,626 | $ | 60,642 | ||||
Gas sold (mcf) |
5,855 | 3,291 | ||||||
Average gas price |
$ | 6.17 | $ | 8.03 | ||||
Gas revenue |
$ | 36,149 | $ | 26,420 | ||||
Total oil and gas revenues |
$ | 297,775 | $ | 87,062 | ||||
Less lease operating expenses |
(67,426 | ) | (93,448 | ) | ||||
Revenues net of lease operating expenses |
$ | 230,349 | $ | (6,386 | ) | |||
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Table of Contents
As shown in the above Pro Forma table, the revenues from our oil and gas properties
retained after the March 31, 2010 sale accounted for very little of our revenues and lease
operating expenses in the quarters ended March 31, 2010 and 2009.
For the quarters ended March 31, 2010 and March 31, 2009, we incurred $2,002,729 and
$1,631,546, respectively, in general and administrative expenses. The $371,183 increase is largely
attributable to a $283,000 increase in employee compensation expense, including $150,000 in
employee cash bonuses relating to the successful March 31, 2010 sale of our Powder River Basin
properties. The bonuses were to all employees, excluding the four employees who also are directors
or large shareholders.
Pro Forma Net Income and Earnings per Share. The above table of Pro Forma Revenues and Lease
Operating Expenses reflects hypothetical cases of the properties that were sold on March 31, 2010
as being sold at the beginning of the respective quarterly periods, i.e., on January 1, 2010 and
January 1, 2009, respectively. If the properties had been sold on January 1, 2010 at the same
price and for the same gain as at March 31, 2010, then for the quarterly period, income from
operations would have changed from $34.7 million to $34.5 million and net income would have changed
from $28.0 million to $27.9 million, with no change in basic earnings per share and a $0.01
reduction in diluted earnings per share.
If the properties had been sold on January 1, 2009, at the same price as at March 31, 2010,
then (i) the estimated recognized gain would have approximated $21 million for that 2009 quarterly
period, (ii) the periods income from operations would have changed from a $3.9 million loss to
approximately $17.8 million of income, and (iii) the periods net income would have changed from a
$3.9 million loss to approximately $16.9 million of income. Earnings per share, basic and
diluted, would have changed from an $0.08 loss per share to approximately $0.35 income per share
(basic) and $0.33 income per share (diluted). However, given industry macroeconomic conditions and
project microeconomic conditions existing in January 2009, Company management believes that if the
properties that were sold on March 31, 2010 were instead sold on January 1, 2009, the sales
proceeds would have been substantially less than the $46.2 million realized at March 31, 2010 and
net income for the 2009 quarter would have been substantially less than the pro forma $16.9 million
and perhaps even a net loss.
Company management cautions that such pro forma net income and pro forma earnings per share
are of limited value in indicating future financial performance when the Company is undertaking a
major 2010 drilling program at its Goliath Project after the successful Bakken formation
completions in the Companys Tong Trust 1-20H well in March 2010 and the Companys Ron Vial1 1-25H
well in May 2010.
Liquidity and Capital Resources
At March 31, 2010 and December 31, 2009, we had working capital of $73.7 million and $44.5
million, respectively. We had cash and cash equivalents at March 31, 2010 of $73.9 million.
For the calendar year ending December 31, 2010, we anticipate spending a total of
approximately $70 million in capital expenditures, consisting primarily of (i) approximately $55
million drilling and completing North Dakota wells to the Bakken formation or Three Forks formation
at our Goliath Project, (ii) approximately $10 million for North Dakota lease acquisitions and
extensions, and approximately $1 million drilling wells at our Bigfoot Project. As a result of our
2010 drilling program, we expect increased revenues from operations in 2010, compared to 2009, for
the last nine months of the year. We anticipate using cash from operations and cash on hand at
March 31, 2010 to pay for capital expenditures in 2010.
For the three-month periods ended March 31, 2010 and March 31, 2009, our sources and uses of
cash were as follows:
Net Cash Provided (Used) By Operating Activities Our net cash provided by operating
activities increased by $2,107,367 (from $1,507,565 net cash used for operating activity for the
quarter ended March 31, 2009 to $599,802 cash provided by operations for the quarter ended March
31, 2010). The increase was due primarily to a $1.7 million increase in payables for lease
operating expenses and general and administrative expenses for the quarter ended March 31, 2010.
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Table of Contents
Net Cash Provided (Used) In Investing Activities During the quarter ended March 31,
2010, investing activities provided a net $32.3 million in cash as compared with $6.0 million of
cash used by investing activities in the quarter ended March 31, 2009. The $38.3 million increase
is primarily due to (i) the $46.2 million received on the sale of oil and gas properties in the
Powder River Basin in Wyoming, less (ii) our $7.4 million increase in spending, relating to our
leasing costs and drilling activity relating to our Goliath Project.
Net Cash Provided By Financing Activities During the quarters ended March 31, 2010
and 2009, the only financing activities were $403,800 in cash received in the 2010 period relating
to stock option exercises by five employees and one director.
PART II
OTHER INFORMATION
Item 6. EXHIBITS
Exhibit | ||||
No. | Description | |||
10 | (i) | Asset Sales Agreement dated March 19, 2010 for the property sale closed March 31, 2010, between
American Oil & Gas Inc and North Finn LLC (the Sellers) and Chesapeake AEZ Exploration, LLC (the
Buyer) |
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31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|||
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|||
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (furnished as Exhibit 32.1 to the Original 10-Q) |
|||
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (furnished as Exhibit 32.2 to the Original 10-Q) |
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Signatures | Title | Date | ||
/s/ Patrick D. OBrien
|
Chief Executive Officer and Chairman of The Board of Directors | June 11, 2010 | ||
/s/ Joseph B. Feiten
|
Chief Financial Officer (principal financial officer and principal accounting officer) | June 11, 2010 |
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