-----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, ImcebTHScRsc5SMVp7ovOIDugBGxWyQKnBFJESv5i0vDtFj2zFHWju9Y8V1UjCV8 3vIcf9njLHG4yJquzDVnyA== 0000950150-96-000893.txt : 19960816 0000950150-96-000893.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950150-96-000893 CONFORMED SUBMISSION TYPE: 10-Q CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960815 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTIMA PETROLEUM CORP CENTRAL INDEX KEY: 0000872248 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19020 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: 502 592 HOWE ST CITY: VANCOUVER BC CANADA STATE: A1 10-Q 1 FORM 10-Q FOR PERIOD ENDED JUNE 30, 1996 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: June 30, 1996 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 August 13, 1996 11,082,742 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 CONDITIONAND RESULTS OF OPERATIONS 11 PART II -- OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 15 SIGNATURES 15
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS OPTIMA PETROLEUM CORPORATION Consolidated Balance Sheets
========================================================================================================= June 30 December 31 1996 1995 - --------------------------------------------------------------------------------------------------------- (unaudited) (audited) ASSETS CURRENT Cash and cash equivalents $ 1,339,116 $ 1,022,925 Accounts receivable 5,114,986 2,472,383 Note receivable 495,187 -- Debenture receivable -- 493,874 - --------------------------------------------------------------------------------------------------------- 6,949,289 3,989,182 OTHER Advances to operators 510,214 1,350,216 Petroleum and natural gas interests, full cost method (Note 2) 33,494,750 33,499,680 Deferred charges 307,381 338,998 - --------------------------------------------------------------------------------------------------------- $ 41,261,634 $ 39,178,076 ========================================================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT Accounts payable and accrued liabilities $ 3,077,109 $ 3,242,322 Loans from shareholders -- -- - --------------------------------------------------------------------------------------------------------- 3,077,109 3,242,322 LONG-TERM DEBT 7,560,233 7,390,400 SITE RESTORATION AND ABANDONMENT 67,682 67,819 SHAREHOLDERS' EQUITY Share capital (Note 3) Authorized 100,000,000 common shares Issued 10,977,512 (1995 - 10,559,442) common shares 30,508,112 29,024,375 Contributed surplus 608,222 608,222 Retained earnings (deficit) (559,724) (1,155,062) - --------------------------------------------------------------------------------------------------------- 30,556,610 28,477,535 - --------------------------------------------------------------------------------------------------------- $ 41,261,634 $ 39,178,076 =========================================================================================================
See accompanying notes to consolidated financial statements. ON BEHALF OF THE BOARD /s/ R.P. Bourgeois, Director /s/ R.L. Hodgkinson, Director 3 4 OPTIMA PETROLEUM CORPORATION Consolidated Statements of Operations and Deficit (unaudited)
================================================================================================================ Three months ended June 30, Six months ended June 30, 1996 1995 1996 1995 - ---------------------------------------------------------------------------------------------------------------- OPERATING INCOME Petroleum and natural gas sales, net of royalties and production taxes $ 2,082,521 $ 1,077,148 $ 4,599,740 $ 2,014,495 Operating costs 328,480 224,172 663,594 385,879 - ---------------------------------------------------------------------------------------------------------------- 1,754,041 852,976 3,936,146 1,628,616 EXPENSES General and administrative (Schedule) 446,056 400,470 836,657 776,980 - ---------------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INTEREST, TAXES, DEPLETION, DEPRECIATION AND AMORTIZATION 1,307,985 452,506 3,099,489 851,636 Depletion and depreciation 846,241 449,396 2,145,481 910,616 Interest and bank charges 182,217 111,215 310,975 156,206 Amortization of deferred financing costs 17,079 -- 34,153 -- Foreign exchange loss (gain) 1,127 (18,370) 3,593 (15,204) Interest revenue (6,385) (50,736) (10,155) (52,972) - ---------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) BEFORE INCOME TAXES 267,706 (38,999) 615,442 (147,010) Income taxes 20,104 25,740 20,104 25,740 - ---------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) FOR THE PERIOD 247,602 (64,739) 595,338 (172,750) DEFICIT, beginning of period (807,326) (10,710,537) (1,155,062) (10,602,526) Reduction of common share stated capital -- 10,602,526 -- 10,602,526 - ---------------------------------------------------------------------------------------------------------------- DEFICIT, end of period $ (559,724) $ (172,750) $ (559,724) $ (172,750) ================================================================================================================ INCOME (LOSS) PER SHARE $ 0.02 $ (0.01) $ 0.06 $ (0.02) ================================================================================================================
See accompanying notes to consolidated financial statements. 4 5 OPTIMA PETROLEUM CORPORATION Consolidated Statements of Changes In Financial Position (unaudited)
================================================================================================================= Three months ended June 30, Six months ended June 30, 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Income (loss) for the period $ 247,602 $ (64,739) $ 595,338 $ (172,750) Items not involving cash Depletion, depreciation and amortization 863,320 449,396 2,179,634 910,616 - ----------------------------------------------------------------------------------------------------------------- 1,110,922 384,657 2,774,972 737,866 Changes in non-cash working capital: Accounts receivable (435,326) 121,084 (2,642,603 360,258 Accounts payable and accrued liabilities (954,012) 321,640 (165,213) (132,971) Debenture receivable -- (497,414) 493,874 (497,414) Loans from shareholders -- 349,500 -- 349,500 - ----------------------------------------------------------------------------------------------------------------- (278,416) 679,467 461,030 817,239 - ----------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Issue of common shares (net of issue expenses) 1,297,155 109,325 1,483,737 151,222 Increase in bank debt 10,235 2,247,000 169,833 3,147,000 Note receivable (495,187) -- (495,187) -- Conversion of convertible debentures -- -- -- (20,000) Deferred financing charges -- (29,122) -- (29,122) - ----------------------------------------------------------------------------------------------------------------- 812,203 2,327,203 1,158,383 3,249,100 - ----------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Proceeds from sale of petroleum and natural gas interests 1,179,625 544,040 1,179,625 925,863 Petroleum and natural gas interests (1,646,535) (3,662,101) (3,248,832) (4,861,290) Advances to operators 842,244 196,484 768,521 57,715 Deferred charges (53) -- (2,536) -- - ----------------------------------------------------------------------------------------------------------------- 375,281 (2,921,577) (1,303,222) (3,877,712) - ----------------------------------------------------------------------------------------------------------------- INCREASE IN CASH 909,068 85,093 316,191 188,627 CASH AND CASH EQUIVALENTS, beginning of period 430,048 418,825 1,022,925 315,291 - ----------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, end of period $ 1,339,116 $ 503,918 $ 1,339,116 $ 503,918 =================================================================================================================
See accompanying notes to consolidated financial statements. 5 6 OPTIMA PETROLEUM CORPORATION Schedules of Consolidated General and Administrative Expense (unaudited)
================================================================================================================= Three months ended June 30, Six months ended June 30, 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------------------------- Consultants $ 166,181 $ 168,626 $ 318,213 $ 335,792 Investor communication 116,175 46,810 149,229 52,055 Legal, audit and tax 64,448 77,882 120,614 157,465 Office expense 32,931 51,405 112,342 116,147 Travel 33,329 38,114 65,251 71,045 Office rent 27,641 4,725 41,660 9,450 Public listing 5,351 12,908 29,348 35,026 - ----------------------------------------------------------------------------------------------------------------- $ 446,056 $ 400,470 $ 836,657 $ 776,980 =================================================================================================================
6 7 OPTIMA PETROLEUM CORPORATION Notes to the Consolidated Financial Statements June 30, 1996 (unaudited) Page 1 =============================================================================== 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, 1995, as filed with the Securities and Exchange Commission. The consolidated financial statements included herein as of June 30, 1996, and for the three and six month periods ended June 30, 1996 and 1995 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 June 30, 1996 and the results of operations and cash flows for the three and six month periods ended June 30, 1996 and 1995. 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 5, 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. (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 the Consolidated Financial Statements June 30, 1996 (unaudited) Page 2 =============================================================================== 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) Petroleum and natural gas interests (continued) 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. Amounts accrued for site restoration and abandonment costs are included in accounts payable and accrued liabilities. The resource expenditure deductions for income tax purposes related to exploration and development activities funded by flow-through share arrangements are renounced to investors in accordance with income tax legislation. Petroleum and natural gas interests are reduced by the estimated renounced income tax benefits when the expenditures are incurred. 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) Measurement uncertainty Estimation of reserves in the Company's petroleum and natural gas interests is subject to inherent uncertainty. Since these reserve measures enter into the computation of net recoverable amount and depreciation, depletion and amortization, there is uncertainty of measurement in the Company's petroleum and natural gas interests. 2. PETROLEUM AND NATURAL GAS INTERESTS
=============================================================================== June 30 December 31 1996 1995 - ------------------------------------------------------------------------------- Petroleum and natural gas interests $ 45,710,683 $ 43,453,987 Other equipment 170,415 143,562 - ------------------------------------------------------------------------------- 45,881,098 43,597,549 Accumulated depreciation and depletion (12,386,348) (10,097,869) - ------------------------------------------------------------------------------- $ 33,494,750 $ 33,499,680 ===============================================================================
8 9 OPTIMA PETROLEUM CORPORATION Notes to the Consolidated Financial Statements June 30, 1996 (unaudited) Page 3 =============================================================================== 3. SHARE CAPITAL (a) Issued ==========================================================================
Number of Capital Shares Stock -------------------------------------------------------------------------- Balance at December 31, 1995 10,559,442 $29,024,375 Issued for cash Eercise of options 414,500 1,475,250 In lieu of consulting fees 3,570 12,560 Common share issue expenses (4,073) -------------------------------------------------------------------------- Balance at June 30, 1996 10,977,512 $30,508,112 ========================================================================== Subsequent to June 30,1996, 105,230 common shares were issued for cash proceeds of $370,034; 100,000 shares were issued for $350,000 upon exercise of options, 3,000 shares for $10,890 in lieu of consulting fees, 714 shares for $3,641 upon exercise of warrants and 1,516 shares for $5,503 as directors' fees. (b) Reserved in respect of options and warrants: ==========================================================================
Exercise Exercisable Holder Number Price On or Before -------------------------------------------------------------------------- Options Company directors and employees 293,000 $3.50 April 3, 1998 50,000 $3.55 April 3, 1998 540,000 $4.15 June 12, 1999 110,000 $4.05 July 25, 1998 Non-related persons 170,000 $3.50 April 3, 1998 100,000 $4.15 June 12, 1999 -------------------------------------------------------------------------- 1,263,000 -------------------------------------------------------------------------- Warrants Issued on purchase of subsidiary 1,374,727 $5.10 February 28, 1997 Non-related persons 13,000 $9.10 August 25, 1996 -------------------------------------------------------------------------- 1,387,727 -------------------------------------------------------------------------- 2,650,727 ==========================================================================
9 10 OPTIMA PETROLEUM CORPORATION Notes to the Consolidated Financial Statements June 30, 1996 (unaudited) Page 4 ================================================================================ 4. RELATED PARTY TRANSACTIONS In the six months ended June 30, 1996, the Company was charged consulting expenses of $183,565 (1995 - $220,282) by companies related by virtue of common directors. Accounts receivable at June 30, 1996 includes $8,225 relating to office services receivable from a related company and at June 30, 1995 includes $554,824 relating to joint interest billings receivable from a related company. Office expense includes $nil (1995 - $55,600) paid to a related company. The Company recovered $10,551 in consulting and rent expenses from a company with a common director in the six months ended June 30, 1996. 5. RECONCILIATION BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES 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 (ii) the acquisition of a subsidiary in exchange for the issuance of shares; and (iii) the issuance of shares on settlement of consulting fees payable. As a result, cash flows from operating, financing and investing activities would be presented as follows under United States accounting principles:
============================================================================================================= Six months ended June 30, Six months ended June 30, 1996 1995 1996 1995 ------------------------------------------------------------------------------------------------------------- Cash flows from: Operating activities $(76,601) $ 788,792 $ 473,590 $ 948,461 Financing activities 810,388 2,217,878 1,145,823 3,117,878 Investing activities 375,281 (2,921,577) (1,303,222) (3,877,712) ------------------------------------------------------------------------------------------------------------- Increase in cash $909,068 $ 85,093 $ 316,191 $ 188,627 =============================================================================================================
Under United States accounting principles, the following supplementary cash flow information would be disclosed:
============================================================================================================= Six months ended June 30, Six months ended June 30, 1996 1995 1996 1995 ------------------------------------------------------------------------------------------------------------- Interest paid $182,217 $111,215 $310,975 $156,206 ============================================================================================================= Income taxes paid $ 20,104 $ 25,740 $ 20,104 $ 25,740 =============================================================================================================
10 11 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. $1.3712 as at August 12, 1996. The following is a discussion of the Company's financial operations for the three and six month periods ended June 30, 1996 and 1995. The notes to the Company's consolidated financial statements included in this report, as well as the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (and the notes attached thereto), should be read in conjunction with this discussion. - ----------------------------------------------------------------------- Working Interest Quarter Ended 1996 1996 June 30 - ----------------------------------------------------------------------- CDN$ 1996 1995 Increase Percentage (Decrease) Increase (Decrease) - ----------------------------------------------------------------------- Volume Natural Gas (mcf) 747,386 530,335 217,051 41% Oil (bbls) 32,641 13,418 19,223 143% Average Price per Unit CDN Natural Gas (mcf) $1.19 $1.66 ($0.47) (28%) Oil (bbls) $26.70 $25.01 $1.69 7% USA Natural Gas (mcf) $3.49 $2.38 $1.11 47% Oil (bbls) $28.93 $25.89 $3.04 12% Gross Revenue, Natural Gas $1,689,176 $1,133,208 $555,968 49% Oil $922,608 $344,547 $578,061 168% - ----------------------------------------------------------------------- Total Revenue $2,611,784 $1,477,755 - -----------------------------------------------------------------------
OVERVIEW RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996, AS COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1995 The Company realized a significant increase in production and improved commodity prices as compared to the second quarter of 1995 which contributed to the increase in gross revenue and earnings before interest, taxes, depletion, depreciation and amortization. Gross natural gas sales increased 41% from 530,335 mcf to 747,386 mcf whereas oil production increased from 13,418 barrels to 32,841 barrels an improvement of 143%. Based on a barrel of oil equivalent ("boe") of 10 to 1 (1 barrel equals 10 mcf) which in our opinion reflects the current, comparative financial value of oil and gas, daily production increased from 730 boe in the second quarter of 1995 to 1,180 boe in the second quarter of 1996 an increase of 62%. Gross revenue increased by 77% from $1,477,755 in second quarter of 1995 to $2,611,784 in the second quarter of 1996. This improvement in revenue is due to a combination of higher U.S. oil and gas prices and the increase in production. 11 12 Earnings before interest, taxes, depletion, depreciation and amortization ("EBITDA") in 1996 increased to $1,307,985 from $452,506 in 1995 an improvement of 188%. EBITDA on per share basis increased to $0.12 per share from $0.05 per share in 1995. Income per share was $0.02 being $247,602 as compared to a $0.01 loss per share in 1995 which was $64,739. The weighted average number of shares issued in the calculation was 10,683,890 shares in 1996 as compared to 8,430,716 in 1995. OPERATING REVENUES. Petroleum and natural gas sales net of royalties and production taxes ("Net Revenue") increased to $2,082,521 in the second quarter of 1996 as compared to $1,077,148 in 1995, an increase of 93%. Canadian Net Revenue increased to $613,084 from $328,340 a year earlier whereas Net Revenue from U.S. operations increased from $748,807 to $1,469,437. OPERATING EXPENSES. Oil and natural gas operating expenses increased to $328,480 in 1996 from $224,172 in the second quarter of 1995. On a boe basis, converting gas to its equivalent barrels at a ratio of 10 mcf equals 1 barrel, operating expenses fell to $3.05 per boe in 1996 from $3.37 per boe in 1995 an improvement of $0.31 per boe. INTEREST EXPENSE. Interest expense and bank charges increased to $182,217 in the second quarter of 1996 as compared to $111,215 in the same period of 1995 an increase of 64%. This change is due to the higher level of bank debt which increased by 176% to $7,550,233 as at June 30, 1996 from $4,976,000 as at June 30, 1995. Offsetting this increase was a reduction in the effective bank interest rate particularly in Canada which is now 7% versus 9.5% a year ago. DEPLETION, DEPRECIATION AND AMORTIZATION. Depletion and depreciation increased to $846,241 in the second quarter of 1996 from $449,396 in the second quarter of 1995 an increase of 88%. On a boe basis, the 1996 expense was $5.38 per boe versus $4.41 per boe in 1995 (this comparison is based on 6 mcf equal 1 barrel which is the energy equivalent). The increase is due to increases in boe production of approximately 54% and the increase in the carrying costs of petroleum and natural gas interests by over $10 million from the previous year. The amortization expense of $17,079, is derived from the costs of the plan of arrangement with Roxbury Capital Corporation which occurred on September 8, 1995. Accordingly, there is no amortization for the second quarter ended June 30, 1995. These deferred charges are being amortized on a straight line over 60 months from the date of acquisition. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses of $446,056 reflect an increase of 11.4% from $400,470 a year earlier, on a boe basis, converting gas to its equivalent barrels at a ratio of 10 mcf equals 1 barrel, general and administrative expenses fell to $4.16 per boe as compared to $6.02 per boe in 1995 an improvement of 31%. SIX MONTHS ENDED JUNE 30, 1996, AS COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1995 The Company enjoyed an increase in production and improved commodity prices as compared to the first six months of 1995 which contributed to the increase in gross revenue and earnings before interest, taxes, depletion, depreciation and amortization. Gross natural gas sales increased 73% from 967,528 mcf to 1,670,844 mcf whereas oil production increased from 27,954 barrels to 62,506 barrels an improvement of 123%. Based on a barrel of oil equivalent ("boe") of 10 to 1 (1 barrel equals 10 mcf) which in our opinion reflects the current, comparative financial value of oil and gas, daily production increased from 685 boe in the first six months of 1995 to 1,261 boe in the first six months of 1996 an increase of 84%. Gross revenue increased by 111% from $2,779,327 in first six months of 1995 to $5,878,249 in the first six months of 1996. This improvement in revenue is due to a combination of higher U.S. oil and gas prices and the increase in production. 12 13 Earnings before interest, taxes, depletion, depreciation and amortization ("EBITDA") in 1996 increased to $3,099,489 from $851,636 in 1995 an increase of 264%. EBITDA on per share basis increased to $0.29 per share from $0.10 per share in 1995. Income per share was $0.06 being $595,338 as compared to a $0.02 loss per share in 1995 which was $172,750. The weighted average number of shares issued in the calculation was 10,683,890 shares in 1996 as compared to 8,430,716 in 1995. OPERATING REVENUES. Petroleum and natural gas sales net of royalties and production taxes ("Net Revenue") increased to $4,599,740 in the first six months of 1996 as compared to $2,014,495 in 1995, an increase of 128%. Canadian Net Revenue increased to $1,360,157 from $551,565 a year earlier whereas Net Revenue from U.S. operations increased from $1,462,929 to $3,239,583. OPERATING EXPENSES. Oil and natural gas operating expenses increased to $663,594 in 1996 from $385,879 in the first six months of 1995. On a boe basis, converting gas to its equivalent barrels at a ratio of 10 mcf equals 1 barrel, operating expenses fell to $2.89 per boe in 1996 from $3.09 per boe in 1995 an improvement of $0.20 per boe. INTEREST EXPENSE. Interest expense and bank charges increased by 99% from $156,206 in the first six months of 1995 to $310,975 for the same period in 1996. This increase was primarily the result of an increase in the bank credit facility with Comerica Bank - Texas granted effective June 1, 1995 for $1.3 million. The effective interest in the first six months of 1996 has benefited from a reduction in Canadian bank rates which have fallen from 9.5% at June 30, 1995 to the current rate of 7.00% on our Canadian facility with the Credit Lyonnais Canada. DEPLETION, DEPRECIATION AND AMORTIZATION. Depletion and depreciation increased to $2,145,481 in the first six months of 1996 from $910,616 in the same period of 1995 an increase of 136%. On a boe basis, the 1996 expense was $6.29 per boe versus $4.81 per boe in 1995 (this comparison is based on 6 mcf equal 1 barrel which is the energy equivalent). The increase is due to increases in boe production of approximately 80% and the increase in the carrying costs of petroleum and natural gas interests by over $10 million from the previous year. The amortization expense of $17,079, is derived from the costs of the plan of arrangement with Roxbury Capital Corporation which occurred on September 8, 1995. Accordingly, there is no amortization for the six months ended June 30, 1995. These deferred charges are being amortized on a straight line over 60 months from the date of acquisition. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses of $836,657 reflect an increase of 7.7% from $776,980 a year earlier, on a boe basis, converting gas to its equivalent barrels at a ratio of 10 mcf equals 1 barrel, general and administrative expenses fell to $3.64 per boe as compared to $6.23 per boe in 1995 an improvement of 42%. LIQUIDITY AND NATURAL RESOURCES During the first six months of 1996, the Company's liquidity needs were met from oil and natural gas production sales, cash reserves as well as proceeds from the issuance of common shares in the amount of $1,483,737. An at June 30, 1996, the Company had a cash balance of $1.3 million and working capital of $3,872,180. Capital expenditures for the first six months of 1996 were $3,248,832 which was partially offset by the sale of non-core assets at Elm Grove, Louisiana, in the amount of $1,179,625. The composition of the capital expended includes lease acquisition, geological and geophysical, drilling, completion and equipping costs in respect of various prospects. The Company has budgeted between $2.0 and $3.0 in its capital program for the remainder of 1996. 13 14 Cash requirements in the future will be funded from existing working capital, cash flow from established properties, newly drilled wells developed on the Company's exploration prospects and extension to the borrowing base with its Canadian and U.S. bankers. In respect of 1997 onwards the Company's cash requirements are dependent upon the results of its current drilling program as well as any new prospects it may undertake. In management's opinion, the Company has sufficient capital resources available to it to fund its development and drilling commitments as well as other obligations and liquidity. It is the policy of the Company to retain its existing cash for reinvestment in the business affairs of the Company and not to pay dividends with respect to its common stock in the foreseeable future. OTHER. From time to time, the Company may make certain statements that contain "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995) and that involve risk and uncertainty. These forward-looking statements may include, but are not limited to, exploration and seismic acquisition plans, anticipated results from current and future exploration prospects, the anticipated results from current and future exploration prospects, the anticipated results of wells based on logging data and production tests, future sales of production, earnings, margins, production levels and costs, market trends in the oil and gas industry and the exploration and development sector thereof, environmental and other expenditures and various business trends. Forward-looking statements may be made by management orally or in writing including, but not limited to, the Management's Discussion and Analysis and Financial Condition Results of Operation section and other sections of the Company's filings with the Securities and Exchange Commission under the Securities Act of 1933 and the Securities Exchange Act of 1934. Actual results and trends in the future may differ materially depending on a variety of factors including, but not limited to, the success of the Company's exploration and development program, changes in the price of oil and natural gas, world-wide political stability and economic growth, the Company's successful execution of internal exploration, development and operating plans, environmental regulation and costs, regulatory uncertainties and legal proceedings. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At the Annual Meeting of Shareholders of the Company held on May 24, 1996, the Company's shareholders ratified the appointment of KPMG Peat Marwick Thorne as the Company's independent auditors for 1996. The number of shares voted for and withheld with respect to the election of the directors and the number of shares voted for and against and the abstention for the ratification of the appointment of the Company's auditors were as follows:
Nominee For Withhold/Against Abstain - ------- --- ---------------- ------- Robert L. Hodgkinson 5,861,311 5,155 66,858 William C. Leuschner 5,861,311 5,155 66,858 Ronald P. Bourgeois 5,858,808 7,658 66,858 Emile D. Stehelin 5,854,633 11,833 66,858 Martin G. Abbott 5,859,094 7,372 66,858 Appointment of Auditors 5,847,999 72,813 12,512
14 15 Additionally the following proposals were approved at the Company's annual meeting:
Affirmative Votes Withhold/Against Abstain ----------------- ---------------- ------- 1. Approval of a new Stock Option Plan, allocating and reserving 750,000 shares for future issuance. 2,301,067 1,248,258 58,718 2. Approval of a share compen- sation arrangement, allocating and reserving 3,740 shares for issuance to outside Directors. 5,186,735 693,037 53,552 3. Approval of a share compen- sation arrangement, allocating and reserving 12,000 shares for issuance to the Chief Financial Officer. 4,787,100 423,815 722,409
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. There were no transactions during the quarter ended June 30, 1996 which could require the filing of a Form 8-K. 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, 1996 By: /s/ Robert L. Hodgkinson ----------------------------------- Robert L. Hodgkinson President - CEO By: /s/ Ronald 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 SECOND QUARTER 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1 CANADIAN DOLLARS YEAR DEC-31-1996 JAN-01-1996 JUN-30-1996 .7316 1,339,116 0 5,610,173 0 0 6,949,289 45,881,098 12,386,348 41,261,634 3,077,109 7,560,233 0 0 30,508,112 48,498 41,261,634 4,599,760 4,609,895 663,594 3,645,732 368,825 0 310,975 615,442 20,104 595,338 0 0 0 595,338 0.06 0.06
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