-----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, DRzwjnDXZl3wZCxRVqd1pGHZV9cZD31QzKmO+tr4I+qT46txbcda58jki55vabs2 ru+XVymTONbteymqhABQNA== 0000950150-96-001367.txt : 19961115 0000950150-96-001367.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950150-96-001367 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 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: 980115468 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19020 FILM NUMBER: 96661475 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 PERIOD ENDED SEPTEMBER 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: September 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 November 12, 1996 11,344,518 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 11 PART II -OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 14 SIGNATURES 14
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS OPTIMA PETROLEUM CORPORATION Consolidated Balance Sheets
================================================================================================== September 30 December 31 1996 1995 - -------------------------------------------------------------------------------------------------- (unaudited) (audited) ASSETS CURRENT Cash and cash equivalents $ 981,737 $ 1,022,925 Cash held in trust 458,850 - Accounts receivable 4,715,621 2,472,383 Note receivable - current portion 164,844 - Debenture receivable - 493,874 - -------------------------------------------------------------------------------------------------- 6,321,052 3,989,182 OTHER Advances to operators 1,468,193 1,350,216 Petroleum and natural gas interests, full cost method (Note 2) 33,355,242 33,499,680 Note receivable - long term portion 329,689 - Deferred charges 290,399 338,998 - -------------------------------------------------------------------------------------------------- $41,764,575 $39,178,076 ================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT Accounts payable and accrued liabilities $ 2,944,901 $ 3,242,322 - -------------------------------------------------------------------------------------------------- 2,944,901 3,242,322 LONG-TERM DEBT 7,384,880 7,390,400 SITE RESTORATION AND ABANDONMENT 173,816 67,819 SHAREHOLDERS' EQUITY Share capital (Note 3) Authorized 100,000,000 common shares Issued 11,084,018 (1995 - 10,559,442) common shares 30,882,778 29,024,375 Contributed surplus 608,222 608,222 Retained earnings (deficit) (230,022) (1,155,062) - -------------------------------------------------------------------------------------------------- 31,260,978 28,477,535 - -------------------------------------------------------------------------------------------------- $41,764,575 $39,178,076 ==================================================================================================
See accompanying notes to consolidated financial statements. ON BEHALF OF THE BOARD /s/ Ronald P. Bourgeois, Director /s/ Robert L. Hodgkinson, Director 3 4 OPTIMA PETROLEUM CORPORATION Consolidated Statements of Operations and Deficit (unaudited)
=========================================================================================================== Three months ended September 30, Nine months ended September 30, 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------------------- OPERATING INCOME Petroleum and natural gas sales, net of royalties and production taxes $2,454,772 $1,162,830 $ 7,054,512 $ 3,177,325 Operating costs 353,358 243,517 1,016,952 629,396 - ----------------------------------------------------------------------------------------------------------- 2,101,414 919,313 6,037,560 2,547,929 EXPENSES General and administrative (Schedule) 396,817 305,166 1,233,474 1,082,146 - ----------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INTEREST, TAXES, DEPLETION, DEPRECIATION AND AMORTIZATION 1,704,597 614,147 4,804,086 1,465,783 Depletion and depreciation 1,196,122 603,333 3,341,603 1,513,949 Interest and bank charges 163,741 133,395 474,716 289,601 Amortization of deferred financing costs 17,094 - 51,247 - Foreign exchange loss (gain) 3,312 (1,241) 6,905 (16,445) Interest and other revenue (5,374) (8,598) (15,529) (61,570) - ----------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) BEFORE INCOME TAXES 329,702 (112,742) 945,144 (259,752) Income taxes - - 20,104 25,740 - ----------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) FOR THE PERIOD 329,702 (112,742) 925,040 (285,492) DEFICIT, beginning of period (559,724) (172,750) (1,155,062) (10,602,526) Reduction of common share stated capital - - - 10,602,526 - ----------------------------------------------------------------------------------------------------------- DEFICIT, end of period $ (230,022) $ (285,492) $ (230,022) $ (285,492) =========================================================================================================== INCOME (LOSS) PER SHARE $ 0.03 $ (0.01) $ 0.09 $ (0.03) ===========================================================================================================
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, 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Income (loss) for the period $ 329,702 $ (112,742) $ 925,040 $ (285,492) Items not involving cash Depletion, depreciation and amortization 1,213,216 603,333 3,392,850 1,513,949 - ------------------------------------------------------------------------------------------------------------------- 1,542,918 490,591 4,317,890 1,228,457 Changes in non-cash working capital: Accounts receivable 399,365 309,329 (2,243,238) 669,587 Accounts payable and accrued liabilities (132,208) (957,893) (297,421) (1,090,864) Loans from shareholders - (116,500) - 233,000 Debenture receivable - 3,540 493,874 (493,874) - ------------------------------------------------------------------------------------------------------------------- 1,810,075 (270,933) 2,271,105 546,306 - ------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Issue of common shares (net of issue expenses) 374,666 1,167,847 1,858,403 1,319,069 Note receivable 654 - (494,533) - Increase (decrease) in bank debt (175,353) 456,380 (5,520) 3,603,380 Issue of securities on purchase of subsidiary - 6,186,272 - 6,186,272 Conversion of convertible debentures - - - (20,000) - ------------------------------------------------------------------------------------------------------------------- 199,967 7,810,499 1,358,350 11,088,721 - ------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Proceeds from sale of petroleum and natural gas interests 56 - 1,179,681 925,863 Petroleum and natural gas interests (950,536) (1,316,351) (4,199,368) (6,177,641) Advances to operators (957,979) (2,449) (189,458) 55,266 Deferred charges (112) (142,826) (2,648) (171,948) Purchase of subsidiary - (6,186,272) - (6,186,272) - ------------------------------------------------------------------------------------------------------------------- (1,908,571) (7,647,898) (3,211,793) (11,554,732) - ------------------------------------------------------------------------------------------------------------------- INCREASE IN CASH 101,471 (108,332) 417,662 80,295 CASH AND CASH EQUIVALENTS, beginning of period 1,339,116 503,918 1,022,925 315,291 - ------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, end of period $ 1,440,587 $ 395,586 $ 1,440,587 $ 395,586 ===================================================================================================================
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, 1996 1995 1996 1995 - --------------------------------------------------------------------------------------------- Consultants $180,805 $150,025 $ 499,018 $ 485,817 Investor communication 31,059 20,352 180,288 72,407 Office expense 63,771 59,035 176,113 175,182 Legal, audit and tax 30,767 29,512 151,381 186,977 Travel 62,626 33,685 127,877 104,730 Office rent 17,211 7,775 58,871 17,225 Public listing 4,073 4,782 33,421 39,808 Directors' fees 6,505 - 6,505 - - --------------------------------------------------------------------------------------------- $396,817 $305,166 $1,233,474 $1,082,146 =============================================================================================
6 7 OPTIMA PETROLEUM CORPORATION Notes to the Consolidated Financial Statements September 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 September 30, 1996, and for the three and nine month periods ended September 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 September 30, 1996 and the results of operations and cash flows for the three and nine month periods ended September 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 September 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
============================================================================== September 30 December 31 1996 1995 - ------------------------------------------------------------------------------- Petroleum and natural gas interests $46,657,351 $43,453,987 Other equipment 174,239 143,562 - ------------------------------------------------------------------------------- 46,831,590 43,597,549 Accumulated depreciation and depletion (13,476,348) (10,097,869) - ------------------------------------------------------------------------------- $33,355,242 $33,499,680 ==============================================================================
8 9 OPTIMA PETROLEUM CORPORATION Notes to the Consolidated Financial Statements September 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 Exercise of options 514,500 1,825,250 Exercise of warrants 714 3,641 In lieu of consulting fees 7,570 27,080 In lieu of directors fees 1,792 6,505 Common share issue expenses (4,073) ---------------------------------------------------------------------------- Balance at September 30, 1996 11,084,018 $30,882,778 ============================================================================
Subsequent to September 30,1996, 260,500 common shares were issued for cash proceeds of $1,002,815; comprised of 260,000 shares issued for $1,001,000 as a private placement and 500 shares issued for $1,815 in lieu of consulting fees. (b) Reserved in respect of options and warrants:
============================================================================ Exercise Exercisable Holder Number Price On or Before ---------------------------------------------------------------------------- Options Company directors and employees 193,000 $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 ---------------------------------------------------------------------------- 1,163,000 ---------------------------------------------------------------------------- Warrants Issued on purchase of subsidiary 1,374,013 $5.10 February 28, 1997 ---------------------------------------------------------------------------- 1,374,013 ---------------------------------------------------------------------------- 2,537,013 ============================================================================
9 10 OPTIMA PETROLEUM CORPORATION Notes to the Consolidated Financial Statements September 30, 1996 (unaudited) Page 4 ============================================================================== 4. Related party transactions In the nine months ended September 30, 1996, the Company was charged consulting expenses of $282,150 (1995 - $311,267) by companies related by virtue of common directors. Accounts receivable at September 30, 1996 includes $10,594 relating to office services receivable from a related company. Office expense includes $nil (1995 - $85,254) paid to a related company. The Company recovered $37,613 in consulting, office and rent expenses from a company with a common director in the nine months ended September 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:
============================================================================================= Three months ended September 30, Nine months ended September 30, 1996 1995 1996 1995 --------------------------------------------------------------------------------------------- Cash flows from: Operating activities $1,824,595 ($110,277) $2,298,185 $838,184 Financing activities 185,447 1,463,571 1,331,270 4,610,571 Investing activities (1,908,571) (1,461,626) (3,211,793) (5,368,460) --------------------------------------------------------------------------------------------- Increase in cash $101,471 ($108,332) $417,662 $80,295 =============================================================================================
Under United States accounting principles, the following supplementary cash flow information would be disclosed:
============================================================================================= Three months ended September 30, Nine months ended September 30, 1996 1995 1996 1995 --------------------------------------------------------------------------------------------- Interest paid $163,741 $133,395 $474,716 $289,601 ============================================================================================= Income taxes paid - - $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. $1.3341 as at November 11, 1996. The following is a discussion of the Company's financial operations for the three and nine month periods ended September 30, 1996 and 1995. The notes to the Company's consolidated financial statements included in this report, as well as the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (and the notes attached thereto), should be read in conjunction with this discussions.
Working Interest Quarter Ended 1996 1996 September 30 CDN$ 1996 1995 Increase Percentage (Decrease) Increase (Decrease) Volume Natural Gas (mcf) 811,542 632,510 179,032 28% Oil (bbls) 39,475 14,556 24,919 171% Average Price per Unit CAN Natural Gas (mcf) $1.18 $1.55 ($0.37) (24%) Oil (bbls) $31.22 $21.74 $9.48 44% USA Natural Gas (mcf) $3.45 $2.12 $1.33 63% Oil (bbls) $29.86 $23.60 $6.62 26% Gross Revenue, Natural Gas $1,908,106 $1,233,062 $675,044 55% Oil $1,185,922 $337,761 $848,161 251% Total Revenue $3,094,028 $1,570,823
OVERVIEW RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1996, AS COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1995 The Company realized a significant increase in production and improved commodity prices as compared to the third 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 28% from 632,510 mcf to 811,542 mcf whereas oil production increased from 14,557 barrels to 39,475 barrels, an improvement of 171%. 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 848 boe in the third quarter of 1995 to 1,309 boe in the second quarter of 1996, an increase of 54%. Gross revenue increased by 97% from $1,570,823 in third quarter of 1995 to $3,094,028 in the third 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 $4,804,086 from $1,465,783 in 1995, an increase of 228%. EBITDA on per share basis increased to $0.44 per share from $0.17 per share in 1995. Income per share was $0.09 being $945,144 as compared to a $0.03 loss per share in 1995 which was $285,492. The weighted average number of shares issued in the calculation was 10,816,953 shares in 1996 as compared to 8,567,471 in 1995. OPERATING REVENUES. Petroleum and natural gas sales net of royalties and production taxes ("Net Revenue") increased to $7,054,512 in the first nine months of 1996 as compared to $3,177,325 in 1995, an increase of 122%. Canadian Net Revenue increased to $1,988,683 from $890,124 a year earlier whereas Net Revenue from U.S. operations increased from $2,287,201 to $5,065,829. OPERATING EXPENSES. Oil and natural gas operating expenses increased to $1,016,952 in 1996 from $629,396 in the first nine 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 $2.90 per boe in 1996 from $3.10 per boe in 1995, an improvement of $0.20 per boe. INTEREST EXPENSE. Interest expense and bank charges increased by 64% from $289,601 in the first nine months of 1995 to $474,716 for the same period in 1996. This increase is due to a combination in the increase in the average principal balance of bank debt and convertible debentures on a year to year comparison as well as the change in the effective interest rate. Long term debt as at September 30, 1996 was $7,384,880 as compared to $5,432,380 a year earlier. Whereas the interest rate on U.S. bank debt fell slightly from 10.25% to 9.75%, the current rate on our Canadian facility is 5.75% as compared to 9.00% a year earlier. The Company has repaid $175,353 of bank debt during the third quarter of 1996. Accordingly, the combination of a reduced principal balance and declining interest should maintain a trend of lower interest expense in the final quarter of 1996. DEPLETION, DEPRECIATION AND AMORTIZATION. Depletion and depreciation increased to $3,341,603 in the first nine months of 1996 from $1,513,949 in the same period of 1995, an increase of 136%. On a boe basis, the 1996 expense was $6.48 per boe versus $4.89 per boe in 1995 (this comparison is based on 6 mcf equals 1 barrel which is the energy equivalent). The increase is due to increases in boe production of approximately 67% and the increase in the carrying costs of petroleum and natural gas interests by over $10 million from the previous year. The quarterly 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 nine months ended September 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 for the first nine months of 1996 of $1,233,474 reflect an increase of 13.9% from $1,082,146 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 $3.52 per boe as compared to $5.35 per boe in 1995, an improvement of 34%. 12 13 LIQUIDITY AND FINANCIAL RESOURCES During the first nine 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 $1,858,403. As at September 30, 1996, the Company had a cash balance of $1.44 million and working capital of $3,376,151. Cash resources include $424,864 (approximately $312,000 U.S. funds) held in a trust account to fund the eventual abandonment and site restoration cost in respect of producing wells acquired during 1996 at Valentine, Louisiana. Capital expenditures for the first nine months of 1996 were $4,199,368 which was partially offset by the sale of non-core assets at Elm Grove, Louisiana, in the amount of $1,179,681. 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 $1.5 and $2.0 million in its capital program for the remainder of 1996. 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. The Company's U.S. bankers agreed in October, 1996, to increase the borrowing base by approximately U.S.$1.4 million to U.S.$3.25 million. This increase in the line of credit is expected to be in place by the end of November, 1996. 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 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. There were no matters submitted to a vote of security holders during the quarter ended September 30, 1996. 13 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. The Company filed a Form 8-K on August 23, 1996, to report that it has received $10,817 from Robert L. Hodgkinson pursuant to Section 16(b) of the Securities Exchange Act of 1934. The short-term profit is based on the purchases and sales involving 25,600 shares purchased at an average cost of $3.61 and average proceeds of disposition of $4.03 per share between January 15, 1996 and June 3, 1996. After the review of the evidence, the Company is confident that the "insider profit" was a result of a misunderstanding of the application of the six month holding rule as it impacts the calculations of short swing profits. Additionally, the Company knows of no confidential information that Mr. Hodgkinson would have in his possession that would have impacted the timing of the purchase and sale of stock. The stock of Optima has traded in the range of between $3.50 and $4.90 on the Toronto Stock Exchange during the period in which the trades occurred. Mr. Hodgkinson as at October 31, 1996 holds 781,400 shares of Optima Petroleum Corporation. 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: November 12, 1996 By: /s/ ROBERT L. HODGKINSON ------------------------------- Robert L. Hodgkinson President - CEO By: /s/ RONALD P. BOURGEOIS -------------------------------- Ronald P. Bourgeois Chief Financial Officer - Secretary 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIRD QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 CANADIAN DOLLARS YEAR DEC-31-1996 JAN-01-1996 SEP-30-1996 .7310 1,440,587 0 4,880,465 0 0 6,321,052 46,831,590 13,476,348 41,764,575 2,944,901 7,384,880 0 0 30,882,778 378,200 41,764,575 7,054,512 7,070,041 1,016,952 5,592,029 532,868 0 474,716 945,144 20,104 925,040 0 0 0 925,040 0.09 0.09
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