-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q/kKh7O2/HdF0lbEUHTKR5gmlVk5NGqhEFVe8EAyIrjxodpQUfMcZm/mABnkltGm 8MCKjpt4mc4JDYaGVchNvA== 0000891020-97-001478.txt : 19971127 0000891020-97-001478.hdr.sgml : 19971127 ACCESSION NUMBER: 0000891020-97-001478 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTIMA PETROLEUM CORP CENTRAL INDEX KEY: 0000872248 STANDARD INDUSTRIAL CLASSIFICATION: 1311 IRS NUMBER: 980115468 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19020 FILM NUMBER: 97720037 BUSINESS ADDRESS: STREET 1: 600 HOWE ST STREET 2: VANCOUVER BRITISH COLUMBIA CITY: CANADA V6C 2T5 STATE: A1 BUSINESS PHONE: 6046846886 MAIL ADDRESS: STREET 1: 600 HOWE ST STREET 2: VANCOUVER BRITISH COLUMBIA CITY: CANADA V6C 2T5 STATE: A1 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q ------------------------------- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 1997 Commission file number: 019020
OPTIMA PETROLEUM CORPORATION (Exact name of registrant as specified in its charter) CANADA 98-0115468 (State of Incorporation) (I.R.S. Employee identification No.) 600-595 HOWE STREET, VANCOUVER, BRITISH COLUMBIA, CANADA V6C 2T5 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (604) 684-6886 Indicate by check mark whether the registrant (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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. Number of shares of Common Stock outstanding at November 7, 1997 11,001,346 -1- 2 OPTIMA PETROLEUM CORPORATION QUARTERLY REPORT ON FORM 10-Q INDEX PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS................................................ 3 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........................................13 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................15 SIGNATURES -2- 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS OPTIMA PETROLEUM CORPORATION Consolidated Balance Sheets
September 30 December 31 1997 1996 -------------- -------------- ASSETS (unaudited) (audited) CURRENT Cash and cash equivalents $ 6,946,802 $ 2,055,062 Cash held in trust - current 249,168 -- Accounts receivable 2,168,145 2,516,578 Note receivable - current portion 125,376 124,423 -------------- -------------- 9,489,491 4,696,063 OTHER Cash held in trust - long term 691,281 638,142 Advances to operators 584,553 468,864 Note receivable - long term portion 250,753 373,269 Petroleum and natural gas interests, full cost method (Note 3) 20,659,523 34,764,350 Deferred charges 222,733 273,980 -------------- -------------- $ 31,898,334 $ 41,214,668 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT Accounts payable and accrued liabilities $ 916,255 $ 2,676,605 Current portion of long-term debt -- 730,947 -------------- -------------- 916,255 3,407,552 LONG-TERM DEBT 138,110 6,119,670 SITE RESTORATION AND ABANDONMENT 200,505 215,018 SHAREHOLDERS' EQUITY Share capital (Note 4) Authorized 100,000,000 common shares Issued 11,000,846 (1996 - 11,318,894) common shares 30,886,244 31,790,695 Contributed surplus 608,222 608,222 Deficit (851,002) (926,489) -------------- -------------- 30,643,464 31,472,428 -------------- -------------- $ 31,898,334 $ 41,214,668 ============== ==============
See accompanying notes to consolidated financial statements. -3- 4 OPTIMA PETROLEUM CORPORATION Consolidated Statements of Operations and Deficit (unaudited)
Three months ended September 30, Nine months ended September 30, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- OPERATING INCOME Petroleum and natural gas sales $ 1,892,262 $ 3,094,028 $ 6,467,944 $ 8,972,277 Royalties and production taxes 809,067 639,256 2,220,222 1,917,765 Operating costs 251,917 353,358 691,157 1,016,952 ----------- ----------- ----------- ----------- 831,278 2,101,414 3,556,565 6,037,560 EXPENSES General and administrative (Schedule) 384,863 396,817 1,296,867 1,233,474 ----------- ----------- ----------- ----------- EARNINGS BEFORE INTEREST, DEPLETION, DEPRECIATION, AMORTIZATION AND INCOME TAXES 446,415 1,704,597 2,259,698 4,804,086 Gain on sale of Canadian petroleum and natural gas interests (Note 2) 117,937 -- (583,414) -- Interest revenue (95,775) (5,374) (157,046) (15,529) Depletion and depreciation 716,417 1,196,122 2,411,212 3,341,603 Interest and bank charges 1,538 163,741 144,782 474,716 Amortization of deferred financing costs 17,082 17,094 51,247 51,247 Foreign exchange loss 18,250 3,312 56,239 6,905 ----------- ----------- ----------- ----------- NET INCOME BEFORE INCOME TAXES (329,034) 329,702 336,678 945,144 INCOME TAXES 1,191 -- 261,191 20,104 ----------- ----------- ----------- ----------- NET INCOME (LOSS) FOR THE PERIOD (330,225) 329,702 75,487 925,040 DEFICIT, beginning of period (520,777) (559,724) (926,489) (1,155,062) ----------- ----------- ----------- ----------- DEFICIT, end of period $ (851,002) $ (230,022) $ (851,002) $ (230,022) =========== =========== =========== =========== INCOME (LOSS) PER SHARE $ (0.03) $ 0.03 $ 0.01 $ 0.09 =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. -4- 5 OPTIMA PETROLEUM CORPORATION Consolidated Statements of Changes In Financial Position (unaudited)
Three months ended September 30, Nine months ended September 30, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Income (loss) for the period $ (330,225) $ 329,702 $ 75,487 $ 925,040 Items not involving cash Gain on sale of Canadian petroleum and natural gas interests (net of 119,128 -- (322,223) -- Depletion, depreciation and amortiza 733,499 1,213,216 2,462,459 3,392,850 ------------ ------------ ------------ ------------ 522,402 1,542,918 2,215,723 4,317,890 Changes in non-cash working capital: Accounts receivable 727,911 399,365 348,433 (2,243,238) Accounts payable and accrued liabili (647,872) (132,208) (1,760,350) (297,421) Net working capital adjustments on sale of Canadian petroleum and natural gas intere (119,128) -- (636,388) -- Debenture receivable -- -- -- 493,874 ------------ ------------ ------------ ------------ 483,313 1,810,075 167,418 2,271,105 ------------ ------------ ------------ ------------ FINANCING ACTIVITIES Issue (repurchase) of common shares (net of expenses) (544,880) 374,666 (904,451) 1,858,403 Repayment of bank debt 60 (175,353) (6,712,507) (5,520) Collection of note receivable (164) 654 121,563 (494,533) ------------ ------------ ------------ ------------ (544,984) 199,967 (7,495,395) 1,358,350 ------------ ------------ ------------ ------------ INVESTING ACTIVITIES Proceeds from the sale of petroleum and natural gas interests -- 56 16,750,000 1,179,681 Petroleum and natural gas interests (1,160,676) (950,536) (4,112,287) (4,199,368) Advances to operators (302,220) (957,979) (115,689) (189,458) Cash held in trust (249,469) -- (302,307) -- Deferred charges -- (112) -- (2,648) ------------ ------------ ------------ ------------ (1,712,365) (1,908,571) 12,219,717 (3,211,793) ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN CASH (1,774,036) 101,471 4,891,740 417,662 CASH AND CASH EQUIVALENTS, beginning of period 8,720,838 1,339,116 2,055,062 1,022,925 ------------ ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 6,946,802 $ 1,440,587 $ 6,946,802 $ 1,440,587 ============ ============ ============ ============
See accompanying notes to consolidated financial statements. -5- 6 OPTIMA PETROLEUM CORPORATION Schedules of Consolidated General and Administrative Expense (unaudited)
Three months ended September 30, Nine months ended September 30, 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Consultants $ 180,025 $ 180,805 $ 564,252 $ 499,018 Office expense 74,291 63,771 276,695 176,113 Legal, audit and tax 36,752 30,767 148,901 151,381 Investor communication 46,989 31,059 137,855 180,288 Public listing 1,421 4,073 32,308 33,421 Office rent 31,571 17,211 81,028 58,871 Travel 12,899 62,626 52,212 127,877 Directors 915 6,505 3,616 6,505 ---------- ---------- ---------- ---------- $ 384,863 $ 396,817 $1,296,867 $1,233,474 ========== ========== ========== ==========
-6- 7 OPTIMA PETROLEUM CORPORATION Notes to Consolidated Financial Statements September 30, 1997 (unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of presentation The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, as filed with the Securities and Exchange Commission. The consolidated financial statements included herein as of September 30, 1997, and for the three and nine month periods ended September 30, 1997 and 1996 are unaudited. Management has reflected all adjustments, consisting of normal and recurring adjustments, which it believes are necessary to present fairly the financial position as at September 30, 1997 and the results of operations and cash flows for the three and nine month periods ended September 30, 1997 and 1996. The consolidated financial statements are presented in accordance with generally accepted accounting principles applicable in Canada and expressed in Canadian dollars. Except as disclosed in Note 6, these financial statements conform, in all material respects, with generally accepted accounting principles in the United States. (b) Basis of consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Optima Energy (U.S.) Corporation. All intercompany transactions and balances have been eliminated. (c) Cash and cash equivalents Cash and cash equivalents include short-term investments with a maturity of ninety days or less at the time of issue. (d) Petroleum and natural gas interests The Company follows the full cost method of accounting for petroleum and natural gas interests whereby all costs of exploring and developing petroleum and natural gas reserves, net of government grants, are capitalized by individual country cost centre. Such costs include land acquisition costs, geological and geophysical expenses, costs of drilling both productive and non-productive wells and overhead charges directly related to acquisition, exploration and development activities. The total carrying value of the Company's petroleum and natural gas interests, less accumulated depletion, is limited to the estimated future net revenue from production of proved reserves, based on unescalated prices and costs plus the lower of cost and net realizable value of unproved properties, less estimated future development costs, general and administrative expenses, financing costs and income taxes. The carrying value of unproved properties is reviewed periodically to ascertain whether impairment has occurred. Where impairment has occurred, the costs have been written down to their net realizable value. For each cost centre, the costs associated with proved reserves are depleted on the unit-of-production method based on an independent engineering estimate of proved reserves, after royalties, with natural gas converted to its energy equivalent at a ratio of six thousand cubic feet of natural gas to one barrel of oil. -7- 8 OPTIMA PETROLEUM CORPORATION Notes to Consolidated Financial Statements September 30, 1997 (unaudited) Site restoration and abandonment costs, net of expected recoveries for production equipment and facilities, at the end of their useful life, are provided for on a unit-of-production basis. Equipment is depreciated on a straight-line basis over five years. (e) Deferred charges Debt financing costs are amortized on a straight line basis over the terms of the related loans. (f) Foreign currency translation Transactions of the Company and its subsidiaries that are denominated in foreign currencies are recorded in Canadian dollars at exchange rates in effect at the related transaction dates. Monetary assets and liabilities denominated in foreign currencies are adjusted to reflect exchange rates at the balance sheet date. Exchange gains and losses arising on the translation of monetary assets and liabilities, except as they relate to long-term debt, are included in the determination of income for the year. Unrealized foreign exchange gains and losses related to long-term debt are deferred and amortized over the remaining term of the related debt. (g) Use of estimates The preparation of 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. Significant areas requiring the use of management estimates relate to the determination of rates for depreciation, depletion and amortization and the impairment of petroleum and natural gas interests. Actual results could differ from these estimates. (h) Fair value of financial instruments Financial instruments include cash and cash equivalents, accounts receivable, note receivable, accounts payable and accrued liabilities and the current and long term portions of long term debt. Fair values approximate carrying values for these financial instruments since they are short term in nature, receivable or payable on demand, or bear interest at floating rates. -8- 9 OPTIMA PETROLEUM CORPORATION Notes to Consolidated Financial Statements September 30, 1997 (unaudited) 2. SALE OF CANADIAN PETROLEUM AND NATURAL GAS INTERESTS On May 30, 1997 the Company closed the sale of a substantial portion of its Canadian petroleum and natural gas interests for cash proceeds of $16,750,000. Previously reported interim results for March 31, 1997 have been restated to exclude the operating results of the Canadian petroleum and natural gas interests from January 1, 1997, the effective date of the disposition. The following pro-forma summary presents comparative consolidated results of operations as if the disposition had occurred at the beginning of 1996:
Three months ended Nine months ended September 30, September 30, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Petroleum and natural gas sales $ 1,892,262 $ 2,464,937 $ 6,467,944 $ 6,749,282 Net income (loss) for the period (330,225) 354,908 75,487 920,978 Income (loss) per share (0.03) 0.04 0.01 0.09 =========== =========== =========== ===========
These pro-forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the disposition been made as of these dates or of results which may occur in the future. 3. PETROLEUM AND NATURAL GAS INTERESTS
September 30, December 31, 1997 1996 ------------ ------------ Petroleum and natural gas interests $ 35,760,257 $ 50,200,530 Other equipment 204,854 176,271 ------------ ------------ 35,965,111 50,376,801 Accumulated depreciation, depletion and write-offs (15,305,588) (15,612,451) ------------ ------------ $ 20,659,523 $ 34,764,350 ============ ============
As at September 30, 1997, unproved properties with capitalized costs of $2,576,311 (December 31 - $4,441,055) were not subject to depletion. It is expected that these properties will be evaluated over the next one to three years. -9- 10 OPTIMA PETROLEUM CORPORATION Notes to Consolidated Financial Statements September 30, 1997 (unaudited) 4. SHARE CAPITAL (a) Issued
Number of Capital Shares Stock ---------- ----------- Balance at December 31, 1996 11,318,894 $31,790,695 In lieu of consulting fees 5,052 18,339 Shares repurchased and canceled under Normal Course Issuer Bid (323,100) (922,790) ---------- ----------- Balance at September 30, 1997 11,000,846 $30,886,244 ========== ===========
Subsequent to September 30, 1997, 500 common shares were issued for cash proceeds of $1,815 in lieu of consulting fees. (b) Reserved in respect of options
Exercise Exercisable Holder Number Price On or Before - - ------------------------------- --------- -------- ------------- Company directors and employees 193,000 $3.50 April 3, 1998 50,000 $3.55 April 3, 1998 100,000 $4.05 July 25, 1999 525,000 $4.15 June 12, 1999 50,000 $3.50 June 2, 1999 Non-related persons 120,000 $3.50 April 3, 1998 125,000 $3.50 June 2, 1999 --------- -------- ------------- 1,163,000 =========
(c) Net income (loss) per share Net income (loss) per share has been calculated based on the following weighted average numbers of shares outstanding:
September 30, September 30, 1997 1996 ------------- ------------- Weighted average number of shares 11,212,969 10,816,953 ========== ==========
-10- 11 OPTIMA PETROLEUM CORPORATION Notes to Consolidated Financial Statements September 30, 1997 (unaudited) 5. RELATED PARTY TRANSACTIONS In the nine months ended September 30, 1997, the Company was charged consulting expenses of $313,335 (1996 - $282,150) by companies related by virtue of common directors. Office expense includes $88,200 paid to a related company. 6. RECONCILIATION BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES (a) Accounting for income taxes Under the asset and liability method of Statement of Financial Accounting Standards No. 109 ("SFAS 109"), deferred income tax assets and liabilities, reduced by a valuation allowance to an amount more likely than not to be recovered, are measured using enacted tax rates for the future income tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. The approximate effect of each component of deferred income tax assets and liabilities at December 31, 1996 is as follows: Net operating losses $ 8,911,000 Petroleum and natural gas interests (4,977,000) ------------ Net deferred tax assets 3,934,000 Less valuation allowance (3,934,000) ------------ Deferred tax assets, net of valuation allowance $ - ============
The valuation allowance equals the entire amount of the net deferred tax assets as the recognition criteria for deferred tax assets has not been met. Therefore, there is no effect of applying the provisions of SFAS 109 on the Company's financial statements. (b) Consolidated statements of changes in financial position Under United States accounting principles, the following items are not considered to be cash items and would not appear in the consolidated statements of changes in financial position: (i) the conversion of debentures; and (ii) the issuance of shares on settlement of consulting fees and directors fees payable. -11- 12 OPTIMA PETROLEUM CORPORATION Notes to Consolidated Financial Statements September 30, 1997 (unaudited) As a result, cash flows from operating, financing and investing activities would be presented as follows under United States accounting principles:
Three Months Ended September 30, Nine Months Ended September 30, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Cash flows from: Operating activities $ 488,758 $ 1,824,595 $ 185,757 $ 2,298,185 Financing activities (550,429) 185,447 (7,513,734) 1,331,270 Investing activities (1,712,365) (1,908,571) 12,219,717 (3,211,793) ------------ ------------ ------------ ------------ Increase (decrease) in cash $ (1,774,036) $ 101,471 $ 4,891,740 $ 417,662 ============ ============ ============ ============
Under United States accounting principals the following supplementary cash flow information would be disclosed:
Three Months Ended September 30, Nine Months Ended September 30, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Interest paid $ 1,538 $ 163,741 $ 144,782 $ 474,716 ============ ============ ============ ============ Income tax paid $ 1,191 -- $ 261,191 $ 20,104 ============ ============ ============ ============
-12- 13 PART I - FINANCIAL INFORMATION CONTINUED ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles. The value of the U.S. Dollar in relation to the Canadian Dollar was U.S. $1.4073 as at November 7, 1997.
Working Interest Quarter Ended September 30 1997 1997 - - ---------------- -------------------------------------------------- -------------- ----------- 1996 1996 Increase Percentage USA Canadian (Decrease) in Increase CDN$ 1997 Operations Operations USA Operations (Decrease) ----------- ----------- ----------- -------------- ----------- Volume Natural Gas (mcf) 287,952 418,853 392,688 (130,901) (31%) Oil (bbls) 33,010 34,150 5,324 (1,140) (3%) Average Price per Unit CDN Natural Gas (mcf) $ -- $ -- $ 1.18 N/A N/A Oil (bbls) $ -- $ -- $ 31.22 N/A N/A USA Natural Gas (mcf) $ 3.49 $ 3.45 $ -- $ 0.04 1% Oil (bbls) $ 26.90 $ 29.86 $ -- $ (2.96) (10%) Gross Revenue, Natural Gas $ 1,004,168 $ 1,445,231 $ 462,875 $ (441,063) (31%) Oil $ 888,094 $ 1,019,706 $ 166,216 $ (131,612) (16%) ----------- ----------- ----------- ----------- ----------- Total Revenue $ 1,892,262 $ 2,464,937 $ 629,091 $ (572,675) =========== =========== =========== =========== =========== Earnings, before Interest, depletion, amortization and taxes ("EBITDA") per Share $ 0.04 $ 0.11 $ 0.04 $ (0.07) (63%) =========== =========== =========== =========== =========== Income(Loss) per Share $ (0.03) $ 0.04 $ (0.01) $ (0.07) N/A =========== =========== =========== =========== ===========
References to "BOE" in the analysis below mean barrels of oil equivalent. For the purposes of this discussion BOE is calculated by converting gas to equivalent barrels at a ration of 6 mcf per barrel. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996 The following discussion reflects the disposition of a substantial portion of the Company's Canadian petroleum and natural gas interests. For clarity, the Company's remaining U.S. operations are analyzed against comparative U.S. operations for the same quarter in the previous year. In comparing the quarters ended September 30, 1997 and 1996, the disposition accounted for a sale of the Canadian operations accounts for a reduction of $692,091 in total revenue, $461,582 in cash flow and 70,772 BOE of production. For information concerning the disposition, reference should be made to Note 2 of the Consolidated Financial Statements as provided in Part I of this report. -13- 14 OVERVIEW An comparison of EBITDA between U.S. operations showed a decline of 74% from $1,243,015 to $446, 415 (from $0.11 to $0.04 per share) due to operating revenue declines combined with a $225,000 retroactive adjustment to royalties booked in the quarter. Income per share for the U.S. operations also decreased by $0.07 per share from the 1996 third quarter to the 1997 third quarter, or from net income of $329,702 to a net loss of $(329,034). The gain on the sale of Canadian petroleum and natural gas interests was adjusted downward due to the payment of unanticipated Canadian crown royalty adjustments for the 1994-96 period. The weighted average number of shares was 11,212,969 at September 30, 1997 as compared to 10,816,953 at September 30, 1996. OPERATING REVENUES A 130,901 mcf decrease in gas volumes in the U.S. is responsible for 78% of the $572,675 decrease in total revenue. The remaining decrease results from a $2.96 decrease in U.S. oil prices between the 1997 and 1996 third quarters. Additionally, delays in our development drilling program at Backridge and East Haynesville have resulted in new producing wells not coming onstream until the latter part of the fourth quarter, 1997. Oil production accounts for 54% of the Companies output in the quarter, as compared to 45% in the prior year. OPERATING EXPENSES Comparative operating costs in the U.S. operations increased 35% from $186,415 in the third quarter of 1996. These costs were $2.85 per BOE in the quarter in 1997 as compared to $1.79 per BOE in 1996. The increases are attributable to workovers performed in the Company's Valentine properties in the quarter. INTEREST EXPENSE Interest and bank charges decreased to $1,538 in the third quarter of 1997 from $163,741 in the same period in 1996, a decrease of 99%. The change is due to a payout of the bank loans at the end of May 1997. DEPLETION, DEPRECIATION AND AMORTIZATION The decrease in depletion and depreciation for the quarter reflects decreased production volumes. On a BOE basis, the 1997 quarter's expense was $8.84 per BOE as compared to $7.65 per BOE in the U.S. last year. Depletion and depreciation in the U.S. for the year ended December 31, 1996 was $9.57 per BOE. GENERAL AND ADMINISTRATIVE EXPENSE General and administrative expenses for the quarter decreased 4% to $384,863 as compared to the third quarter of 1996. Due production decreases, and to the disposal of 37% of the production base in the third quarter of 1996, administrative costs increased from $2.27 per BOE in 1996 to $4.35 per BOE in 1997. BALANCE SHEET The sale of the Canadian operations has made a significant impact on the balance sheet. Total assets at September 30, 1997 were $31, 898,334 as compared to $41,214,668 a year earlier and $33,421,251 as at June 30, 1997. Working capital was $8,573,236 at the end of the third quarter of 1997 as compared to $2,917,301 a year earlier. Property additions and drilling costs of $1,160,676 and along with the repurchase of 204,000 common shares for $544,880 reduced working capital by $1,604,823 as compared to June 30, 1997. To date, a total of 350,000 common shares have been repurchases at an average cost of $2.92 per share. CERTAIN OF THE FOREGOING STATEMENTS MAY BE DEEMED "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES EXCHANGE ACT OF 1934. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, THERE CAN BE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. CERTAIN RISKS AND UNCERTAINTIES INHERENT IN THE COMPANY'S BUSINESS ARE SET FORTH IN THE FILINGS OF THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE RISKS INCLUDE PRICE CHANGES FOR OIL AND GAS, RISKS REGARDING ESTIMATES OF RESERVES, PRODUCTION RISKS, GOVERNMENTAL REGULATIONS AND GENERAL RISKS REGARDING THE EXPLORATION FOR, AND THE PRODUCTION OF, OIL AND GAS RESERVES. -14- 15 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. There was no Form 8-K filed during the quarter ended September 30, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OPTIMA PETROLEUM CORPORATION AND SUBSIDIARIES (Registrant) Date: August 13, 1997 By: /s/ R.L. Hodgkinson Robert L. Hodgkinson President - CEO By: /s/ R.P. Bourgeois Ronald P. Bourgeois Chief Financial Officer - Secretary -15- EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIRD QUARTER 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINACIAL YEAR DEC-31-1997 JAN-01-1997 SEP-30-1997 6,946,802 0 2,168,145 0 0 9,489,491 35,965,111 15,305,588 31,898,334 916,255 138,110 0 0 30,886,244 (242,780) 31,898,334 6,467,944 7,208,404 2,911,379 6,619,458 252,268 0 144,782 336,678 261,191 75,487 0 0 0 75,487 0.01 0.01
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