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EX-32 - EX-32 - FIELDPOINT PETROLEUM CORP | d348537dex32.htm |
EX-31 - EX-31 - FIELDPOINT PETROLEUM CORP | d348537dex31.htm |
EXCEL - IDEA: XBRL DOCUMENT - FIELDPOINT PETROLEUM CORP | Financial_Report.xls |
U.S. 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 March 31, 2012
¨ | 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: 001-32624
FieldPoint Petroleum Corporation
(Exact name of small business issuer as specified in its charter)
Colorado | 84-0811034 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
1703 Edelweiss Drive Cedar Park, Texas |
78613 | |
(Address of Principal Executive Offices) | (Zip Code) |
(512) 250-8692
(Issuers Telephone Number, Including Area Code)
(former name, address and 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 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 x No ¨
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 x No ¨
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 definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer ¨ | Accelerated filer ¨ | |||||
Non-accelerated filer ¨ | (Do not check if a smaller reporting company) | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of May 10, 2012, the number of shares outstanding of the Registrants $.01 par value common stock was 8,010,175.
PART I
Item 1. Condensed Consolidated Financial Statements
FieldPoint Petroleum Corporation
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2012 |
December 31, 2011 |
|||||||
ASSETS |
| |||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | 2,865,754 | $ | 2,037,593 | ||||
Certificates of deposit |
44,507 | 44,469 | ||||||
Accounts receivable: |
||||||||
Oil and natural gas sales |
1,415,368 | 1,007,025 | ||||||
Joint interest billings, less allowance for doubtful accounts of $99,000, each period |
206,815 | 209,209 | ||||||
Prepaid income taxes |
332,134 | 332,134 | ||||||
Deferred income tax asset current |
87,000 | 58,000 | ||||||
Prepaid expenses and other current assets |
160,741 | 121,745 | ||||||
|
|
|
|
|||||
Total current assets |
5,112,319 | 3,810,175 | ||||||
PROPERTY AND EQUIPMENT: |
||||||||
Oil and natural gas properties (successful efforts method) |
28,100,182 | 27,616,928 | ||||||
Other equipment |
52,113 | 52,113 | ||||||
Less accumulated depletion and depreciation |
(10,692,827 | ) | (10,116,327 | ) | ||||
|
|
|
|
|||||
Net property and equipment |
17,459,468 | 17,552,714 | ||||||
|
|
|
|
|||||
Total assets |
$ | 22,571,787 | $ | 21,362,889 | ||||
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|
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LIABILITIES AND STOCKHOLDERS EQUITY |
| |||||||
CURRENT LIABILITIES: |
||||||||
Accounts payable and accrued expenses |
$ | 2,324,088 | $ | 2,506,145 | ||||
Oil and natural gas revenues payable |
238,160 | 259,129 | ||||||
Asset retirement obligationcurrent |
25,000 | 25,000 | ||||||
Unrealized loss on commodity derivatives |
31,000 | | ||||||
|
|
|
|
|||||
Total current liabilities |
2,618,248 | 2,790,274 | ||||||
LONG TERM DEBT |
6,740,000 | 6,740,000 | ||||||
DEFERRED INCOME TAXES |
1,910,000 | 1,467,000 | ||||||
ASSET RETIREMENT OBLIGATIONS |
1,513,002 | 1,490,002 | ||||||
|
|
|
|
|||||
Total liabilities |
12,781,250 | 12,487,276 | ||||||
STOCKHOLDERS EQUITY: |
||||||||
Common stock, $.01 par value, 75,000,000 shares authorized; 8,937,175 and 8,910,175 shares issued, respectively, and 8,010,175 and 7,983,175 outstanding, respectively |
89,371 | 89,101 | ||||||
Additional paid-in capital |
11,589,091 | 4,573,580 | ||||||
Retained earnings |
78,967 | 6,179,824 | ||||||
Treasury stock, 927,000 shares each period, at cost |
(1,966,892 | ) | (1,966,892 | ) | ||||
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|
|
|||||
Total stockholders equity |
9,790,537 | 8,875,613 | ||||||
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|
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Total liabilities and stockholders equity |
$ | 22,571,787 | $ | 21,362,889 | ||||
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|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
2
FieldPoint Petroleum Corporation
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, |
||||||||
2012 | 2011 | |||||||
REVENUE: |
||||||||
Oil and natural gas sales |
$ | 3,229,504 | $ | 1,697,545 | ||||
Well operational and pumping fees |
17,066 | 17,066 | ||||||
Disposal fees |
26,000 | 13,000 | ||||||
|
|
|
|
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Total revenue |
3,272,570 | 1,727,611 | ||||||
COSTS AND EXPENSES: |
||||||||
Lease operating |
932,602 | 570,688 | ||||||
Depletion and depreciation |
576,500 | 243,000 | ||||||
Accretion of discount on asset retirement obligations |
23,000 | 21,000 | ||||||
General and administrative |
387,848 | 251,645 | ||||||
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|
|
|
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Total costs and expenses |
1,919,950 | 1,086,333 | ||||||
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|
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OPERATING INCOME |
1,352,620 | 641,278 | ||||||
OTHER INCOME (EXPENSE): |
||||||||
Interest income |
1,030 | 838 | ||||||
Interest expense |
(64,827 | ) | (59,849 | ) | ||||
Unrealized loss on commodity derivatives |
(31,000 | ) | | |||||
Miscellaneous |
181 | | ||||||
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|
|
|
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Total other expense |
(94,616 | ) | (59,011 | ) | ||||
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|
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INCOME BEFORE INCOME TAXES |
1,258,004 | 582,267 | ||||||
Income tax provision current |
(49,500 | ) | (87,000 | ) | ||||
Income tax provision deferred |
(414,000 | ) | (118,000 | ) | ||||
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Total income tax provision |
(463,500 | ) | (205,000 | ) | ||||
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NET INCOME |
$ | 794,504 | $ | 377,267 | ||||
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NET INCOME PER SHARE: |
||||||||
BASIC |
$ | 0.10 | $ | 0.05 | ||||
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DILUTED |
$ | 0.10 | $ | 0.05 | ||||
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WEIGHTED AVERAGE SHARES OUTSTANDING: |
||||||||
BASIC |
7,983,768 | 8,064,991 | ||||||
DILUTED |
8,138,359 | 8,064,991 |
See accompanying notes to these unaudited condensed consolidated financial statements.
3
FieldPoint Petroleum Corporation
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, |
||||||||
2012 | 2011 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 794,504 | $ | 377,267 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depletion and depreciation |
576,500 | 243,000 | ||||||
Unrealized loss on commodity derivatives |
31,000 | | ||||||
Deferred income taxes |
414,000 | 118,000 | ||||||
Accretion of discount on asset retirement obligations |
23,000 | 21,000 | ||||||
Common shares issued in lieu of compensation |
120,420 | | ||||||
Changes in current assets and liabilities: |
||||||||
Accounts receivable |
(405,949 | ) | (58,639 | ) | ||||
Prepaid expenses and other current assets |
(38,996 | ) | 70,000 | |||||
Accounts payable and accrued expenses |
(182,057 | ) | (121,729 | ) | ||||
Oil and gas revenues payable |
(20,969 | ) | 47,508 | |||||
Other |
(38 | ) | | |||||
|
|
|
|
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Net cash provided by operating activities |
1,311,415 | 696,407 | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Additions to oil and natural gas properties |
(483,254 | ) | (54,836 | ) | ||||
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|
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Net cash used in investing activities |
(483,254 | ) | (54,836 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Purchase of treasury shares |
| (73,893 | ) | |||||
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|
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Net cash used in financing activities |
| (73,893 | ) | |||||
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NET CHANGE IN CASH AND CASH EQUIVALENTS |
828,161 | 567,678 | ||||||
CASH AND CASH EQUIVALENTS, beginning of the period |
2,037,593 | 984,770 | ||||||
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CASH AND CASH EQUIVALENTS, end of the period |
$ | 2,865,754 | $ | 1,552,448 | ||||
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SUPPLEMENTAL INFORMATION: |
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Cash paid during the period for interest |
$ | 64,827 | $ | 59,849 | ||||
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Cash paid during the period for taxes |
$ | | $ | | ||||
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|
See accompanying notes to these unaudited condensed consolidated financial statements.
4
FieldPoint Petroleum Corporation
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business, Organization and Basis of Preparation and Presentation
FieldPoint Petroleum Corporation (the Company, our, or we) is incorporated under the laws of the state of Colorado. The Company is engaged in the acquisition, operation and development of oil and natural gas properties, which are located in Louisiana, New Mexico, Oklahoma, Texas, and Wyoming.
The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. However, in the opinion of management, all adjustments (which consist only of normal recurring adjustments) necessary to present fairly the financial position and results of operations for the periods presented have been made. You should read these condensed consolidated financial statements in conjunction with the consolidated financial statements and the notes thereto included in the Company's Form 10-K filing for the year ended December 31, 2011.
2. Earnings Per Share
Basic earnings per share are computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share take common stock equivalents (such as options and warrants) into consideration using the treasury stock method. The Company distributed warrants as a dividend to stockholders as of the record date, March 23, 2012. The potential dilutive effect of the warrants is 1,758,477 shares as of March 31, 2012. The Company had no dilutive or potentially dilutive common stock equivalents outstanding during the three months ended March 31, 2011.
For the Three Months
Ended March 31, |
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2012 | 2011 | |||||||
Net income |
$ | 794,504 | $ | 377,267 | ||||
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Weighted average common stock outstanding |
7,983,768 | 8,064,991 | ||||||
Weighted average dilutive effect of stock warrants |
154,591 | | ||||||
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Dilutive weighted average shares |
8,138,359 | 8,064,991 | ||||||
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Earnings per share: |
||||||||
Basic |
$ | 0.10 | $ | 0.05 | ||||
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Diluted |
$ | 0.10 | $ | 0.05 | ||||
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3. Income Taxes
For the three months ending March 31, 2012, and 2011, the tax provision is approximately 37% and 35%, respectively, of book income before tax which differed from the statutory federal and state rates due primarily to permanent differences in book and taxable income related to the domestic production activities deduction.
5
4. Treasury Stock Repurchase Program
We repurchased a total of 17,000 common shares with an aggregate cost of $73,893 during the three months ended March 31, 2011. During the three months ended March 31, 2012, no shares of common stock were repurchased.
5. Related Party Transactions
The Company leases office space from its president. Rent expense for this month-to-month lease was $7,500 for each of the three months ended March 31, 2012 and 2011.
6. Stockholders Equity
On March 29, 2012, our Board of Directors authorized the Company to issue 27,000 shares of common stock, with no vesting terms to management and the board of directors. The value of the stock at the date of the grant was $120,420, which was recorded in general and administrative expenses.
The Company approved a stock warrant dividend of one warrant per one common share outstanding in the fourth quarter of 2011 with the record date of March 23, 2012. A total of 7,983,175 warrants were issued and have an exercise price of $4.00. The warrants are exercisable over 6 years from the record date. The Company has the right to call the warrants in the future if the market price of the common stock exceeds 150% of the exercise price of the warrant ($6.00) for ten (10) or more consecutive trading days. The fair value of the warrants of approximately $8,000,000 was reclassified from retained earnings to additional paid in capital to the extent of available retained earnings of $6,895,361 on the record date.
7. Commodity Derivatives
In January 2012, we entered into the following commodity derivatives positions to hedge our oil production price risk. These positions were outstanding at March 31, 2012:
Period |
Volume (Barrels) | $/Barrel | ||||||||||||||
Daily | Total | Floor | Ceiling | |||||||||||||
NYMEX WTI Collars April 2012 June 2012 |
200 | 18,200 | $ | 95.00 | $ | 106.50 |
The following table summarizes the fair value of our open commodity derivatives as of March 31, 2012 and December 31, 2011:
Liability Derivatives | ||||||||||||
Fair Value | ||||||||||||
Balance Sheet Location |
March 31, 2012 |
December 31, 2011 |
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Derivatives not designated as hedging instruments |
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Commodity derivatives |
Current Liabilities | $ | 31,000 | $ | |
6
Unrealized gains and losses, at fair value, are included on our consolidated balance sheets as current or non-current assets or liabilities based on the anticipated timing of cash settlements under the related contracts. Changes in the fair value of our commodity derivative contracts are recorded in earnings as they occur and included in other income (expense) on our consolidated statements of operations. We estimate the fair values of collar contracts based on the present value of the difference in exchange-quoted forward price curves and contractual settlement prices multiplied by notional quantities. We internally valued the option contracts using industry-standard option pricing models and observable market inputs. We use our internal valuations to determine the fair values of the contracts that are reflected on our consolidated balance sheets. Realized gains and losses are also included in other income (expense) on our consolidated statements of operations.
We are exposed to credit losses in the event of non-performance by the counterparties on our commodity derivatives positions and have considered the exposure in our internal valuations. However, we do not anticipate non-performance by the counterparties over the term of the commodity derivatives positions. To estimate the fair value of our commodity derivatives positions, we use market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. We primarily apply the market approach for recurring fair value measurements and attempt to use the best available information. We determine the fair value based upon the hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and lowest priority to unobservable inputs (Level 3 measurement). The three levels of fair value hierarchy are as follows:
| Level 1 Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. At March 31, 2012, we had no Level 1 measurements |
| Level 2 Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Our derivatives, which consist of commodity collars, are valued using commodity market data which is derived by combining raw inputs and quantitative models and processes to generate forward curves. Where observable inputs are available, directly or indirectly, for substantially the full term of the asset or liability, the instrument is categorized in Level 2. At March 31, 2012, all of our commodity derivatives were valued using Level 2 measurements. |
| Level 3 Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in managements best estimate of fair value. At March 31, 2012, we had no Level 3 measurements. |
8. Subsequent Events
On April 19, 2012, the Company entered into a costless collar hedging 200 barrels of oil production per day from July 2012 through December 2012. The collar has a floor of $95.00 and a ceiling of $110.30 per barrel of oil.
7
PART I
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the Companys Condensed Consolidated Financial Statements, and respective notes thereto, included elsewhere herein. The information below should not be construed to imply that the results discussed herein will necessarily continue into the future or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of the management of FieldPoint Petroleum Corporation.
General
FieldPoint Petroleum Corporation derives its revenues from its operating activities including sales of oil and natural gas and operating oil and natural gas properties. The Company's capital for investment in producing oil and natural gas properties has been provided by cash flow from operating activities and from bank financing. The Company categorizes its operating expenses into the categories of production expenses and other expenses.
Results of Operations
Comparison of three months ended March 31, 2012 to the three months ended March 31, 2011
Quarter Ended March 31, | ||||||||
2012 | 2011 | |||||||
Revenue: |
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Oil sales |
$ | 3,030,318 | $ | 1,559,198 | ||||
Natural gas sales |
199,186 | 138,347 | ||||||
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Total oil and natural gas sales |
$ | 3,229,504 | $ | 1,697,545 | ||||
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Sales volumes: |
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Oil (Bbls) |
31,804 | 16,470 | ||||||
Natural gas (Mcf) |
40,031 | 24,871 | ||||||
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Total (BOE) |
38,476 | 20,615 | ||||||
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Average sales prices |
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Oil ($/Bbl) |
$ | 95.28 | $ | 94.67 | ||||
Natural gas ($/Mcf) |
4.98 | 5.56 | ||||||
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Total ($/BOE) |
$ | 83.94 | $ | 82.35 | ||||
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Costs and expenses ($/BOE) |
||||||||
Lease operating expense |
$ | 24.24 | $ | 27.68 | ||||
Depletion and depreciation |
14.98 | 11.79 | ||||||
Accretion of discount on asset retirement obligations |
0.60 | 1.02 | ||||||
General and administrative |
10.08 | 12.21 | ||||||
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Total |
$ | 49.90 | $ | 52.70 | ||||
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Oil and natural gas sales revenues increased 90% or $1,531,959 to $3,229,504 for the three-month period ended March 31, 2012 from the comparable 2011 period. Higher sales volumes account for approximately $1,536,000 offset by approximately $4,000 related to pricing. Sales volumes increased 87% on a BOE basis, primarily due to production from the new well in New Mexico completed in December, 2011. Average oil sales prices increased 1% to $95.28 for the three-month period ended March 31, 2012 compared to $94.67 for the period ended March 31, 2011. Average natural gas sales prices decreased 10% to $4.98 for the three-month period ended March 31, 2011 compared to $5.56 for the period ended March 31, 2011. We anticipate volumes to decrease in the coming quarters due to wells down.
8
Lease operating expenses increased 63% or $361,914 to $932,602 for the three month period ended March 31, 2012 from the comparable 2011 period. This was primarily due to the costs associated with new field production in 2012 as compared to 2011 and a one-time charge to settle a severance tax claim for the period from 2006 through 2011 of approximately $251,000. Lifting costs per BOE decreased 12% or $3.44 to $24.24 for the period. We anticipate lease operating expenses to increase over the following quarters due to the additional remedial repairs and workover expenses.
Depletion and depreciation increased 137% or $333,500 to $576,500 for the three month period ended March 31, 2012 versus $243,000 in the 2011 comparable period. This was primarily due to the addition of the new East Lusk well and increased sales volumes during the current period.
General and administrative overhead cost increased 54% or $136,203 to $387,848 for the three-month period ended March 31, 2012 from the three-month period ended March 31, 2011. This was primarily attributable to 27,000 shares of common stock issued to the board of directors in lieu of cash compensation valued at $120,420 during the 2012 period. At this time, we anticipate general and administrative expenses to remain materially constant in the coming quarters.
Other expenses, net for the quarter ended March 31, 2012, increased $35,605 to $94,616 primarily due to an unrealized loss on commodity derivatives of $31,000. Other expenses, net for the quarter ended March 31, 2011 were $59,011.
Liquidity and Capital Resources
Cash flow provided by operating activities was $1,311,415 for the three-month period ended March 31, 2012, as compared to $696,407 in the comparable 2011 period. The increase in cash from operating activities was primarily due to increases in the sales volumes, net income, and depletion expense.
Cash flow used in investing activities was $483,254 for the three-month period ended March 31, 2012 and $54,836 in the comparable period due to the additions to oil and natural gas properties and equipment in each period.
Cash flow used in financing activities was used to repurchase 17,000 shares of common stock for a total of $73,893 during the three-month period ended March 31, 2011. No treasury shares were acquired during the three month period ended March 31, 2012.
We may continue to raise financing through draws from our line of credit. We anticipate our operating cash flow, potential proceeds from outstanding warrants and other capital resources, if needed, will adequately fund planned capital expenditures and other capital uses over the near term. Based on industry outlook for 2012, prices for oil and natural gas could remain higher than the prior year.
9
PART I
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We periodically enter into certain commodity price risk management transactions to manage our exposure to oil and natural gas price volatility. These transactions may take the form of futures contracts, swaps or options. Unrealized gains and losses related to the change in fair value of derivative contracts that qualify and are designated as cash flow hedges are recorded as other comprehensive income or loss and such amounts are reclassified to oil and natural gas sales revenues as the associated production occurs. Derivative contracts that do not qualify for hedge accounting treatment are recorded as derivative assets and liabilities at fair value in the consolidated balance sheet, and the associated unrealized gains and losses are recorded as current expense or income in the consolidated statement of operations. While such derivative contracts do not qualify for hedge accounting, management believes these contracts can be utilized as an effective component of commodity price risk management activities. At March 31, 2012, we had collars with a floor of $95.00 and a ceiling of $106.50 for 200 barrels of oil per day from January 1, 2012 to June 30, 2012. At March 31, 2011, there were no open positions. We have an unrealized loss of $31,000 on commodity derivative transactions during the three-month period ending March 31, 2012.
PART I
Item 4. CONTROLS AND PROCEDURES
a) | Disclosure Controls and Procedures |
The Companys Principal Executive Officer and Principal Financial Officer, Ray Reaves, has established and is currently maintaining disclosure controls and procedures for the Company. The disclosure controls and procedures have been designed to provide reasonable assurance that the information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed by the Company is accumulated and communicated to the Company's management as appropriate to allow timely decisions regarding required disclosure.
The Principal Executive Officer and Principal Financial Officer conducted a review and evaluation of the effectiveness of the Companys disclosure controls and procedures and have concluded, based on his evaluation as of the end of the period covered by this Report, that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed by the Company is accumulated and communicated to management, including our principal executive officer and our principal financial officer, to allow timely decisions regarding required disclosure and we refer you to Exchange Act Rule 13a-15(e).
b) | Changes in Internal Control over Financial Reporting |
There has been no change in our internal control over financial reporting during the first quarter ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
10
c) | Limitations of Any Internal Control Design |
Our principal executive and financial officer do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive and financial officer have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
11
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of equity during the period ended March 31, 2012
Item 3. Default Upon Senior Securities
None.
Item 4. [Removed and Reserved]
Item 5. Other Information
None.
Item 6. Exhibits
Exhibits | ||||
31 | Certification | |||
32 | Certification Pursuant to U.S.C. Section 1350 | |||
101.INS XBRL | Instance Document | |||
101.SCH XBRL | Schema Document | |||
101.CAL XBRL | Calculation Linkbase Document | |||
101.LAB XBRL | Label Linkbase Document | |||
101.PRE XBRL | Presentation Linkbase Document | |||
101.DEF XBRL | Definition Linkbase Document |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 10, 2012 | By: | /s/ Ray Reaves Ray | ||
Reaves, President, Chief Executive | ||||
Officer, Treasurer and Chief Financial Officer |
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