EARNINGS / Pendaries Petroleum Ltd. Releases 1st Quarter 1998
Results And Provides General Update
TSE SYMBOL: PDQ
MAY 7, 1998
TORONTO, ONTARIO--Pendaries Petroleum Ltd. held its annual general
meeting on Thursday, May 7, 1998 and completed the scheduled
business for the meeting including the reappointment of Arthur
Andersen & Co. as auditors and the re-election of the current
board of directors. The Company also released its financial
results for the three months ending March 31, 1998. At the end of
the 1st quarter of 1998 the Company had approximately $13.3
million (all figures in US$, unless otherwise noted) in cash and
cash equivalents to finance its exploration programs in the Bohai
Bay of China and the South China Sea. Expenditure on wells drilled
to date has been within the Company's budget.
The Company reported revenues from oil and gas production in
Alberta, Canada and interest income of $112,854 for the 1st
quarter of 1998, compared to $179,196 for the same period last
year. For the 1st quarter, the Company reported a net loss of
$381,234, or four cents a share, contrasted to a net loss of
$123,371, or one cent a share for the 1st quarter of 1997. During
the quarter, the Company settled litigation with a former officer,
which had been reported earlier and is noted in the current
quarterly financial statements.
In the review of operations, Robert E. Rigney, Chairman and Chief
Executive Officer, announced that Pendaries is in the advanced
stages of negotiations with other parties to increase the
Company's interest in its current holdings in China. It is
anticipated that this will have a positive impact on the Company's
asset position. "This is a major step in our overall growth
strategy and underscores our commitment to China as a very
prospective exploration area," said Mr. Rigney.
Drilling results were also announced for the EP 11-1-1 well on the
27/11 block in the Pearl River Mouth Basin area of the South China
Sea. The exploratory well was drilled to test a subtle, four-way
anticlinal closure. The well reached a total depth of 10,140 feet
in 23 days. Logs and sidewall cores identified four Tertiary
sandstone hydrocarbon-bearing zones between 6150 and 6800 feet,
for a combined reservoir thickness of 19 feet. Pendaries and its
partners decided that the zones would not support commercial
development on a stand-alone basis. It has been noted that Santa
Fe Resources recently drilled a discovery well on the block
immediately east of 27/11. The well flowed 6,000 barrels of crude
oil per day and will impact positively on several prospects on the
27/11 block.
Pendaries Petroleum Ltd. is an international exploration company
with interest in five highly prospective blocks offshore China.
REVIEW ENGAGEMENT REPORT
To the Shareholders of
Pendaries Petroleum Ltd.:
We have reviewed the interim consolidated balance sheet of
PENDARIES PETROLEUM LTD. as at March 31, 1998 and the interim
statements of operations and deficit and changes in financial
position for the three month period ended March 31, 1998. Our
review was made in accordance with generally accepted standards
for review engagements and accordingly consisted primarily of
enquiry, analytical procedures and discussion related to
information supplied to us by the Company.
A review does not constitute an audit and consequently we do not
express an audit opinion on these interim consolidated financial
statements.
Based on our review, nothing has come to our attention that causes
us to believe that these interim consolidated financial statements
are not, in all material respects, in accordance with generally
accepted accounting principles.
April 23, 1998
Mississauga, Canada.
/T/
PENDARIES PETROLEUM LTD.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998
(Prepared from the accounts without audit)
(With comparative figures for the preceding year - Note 4)
(All figures are in U.S. dollars, unless otherwise stated)
March 31, December 31,
1998 1997
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,332,233 $ 15,133,285
Accounts receivable 267,344 213,243
Prepaid expenses
and other assets 39,678 18,457
------------ ------------
Total current assets 13,639,255 15,364,985
------------ ------------
PROPERTY AND EQUIPMENT:
Oil and gas properties, recorded
under the full-cost method-
Proved 6,556,094 6,556,094
Unproved 11,240,932 9,729,119
Furniture, fixtures
and other equipment 247,537 227,657
Accumulated depreciation,
depletion and amortization (465,883) (378,279)
------------ ------------
Net property
and equipment 17,578,680 16,134,591
------------ ------------
Total assets $ 31,217,935 $ 31,499,576
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 40,764 $ 88,060
Accrued liabilities 163,751 187,891
------------ ------------
Total current liabilities 204,515 275,951
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock (Note 3)
Authorized unlimited
number of common shares
Issued 8,769,470 common
shares (1997 - 8,726,470) 32,489,342 32,328,761
Cumulative translation
adjustment 14,628 4,180
Deficit (1,490,550) (1,109,316)
------------ ------------
Total shareholders'
equity 31,013,420 31,223,625
------------ ------------
Total liabilities and
shareholders' equity $ 31,217,935 $ 31,499,576
------------ ------------
------------ ------------
Approved on behalf of the Board:
----------------------------, Director
----------------------------, Director
The accompanying notes are an integral part of these consolidated
financial statements.
PENDARIES PETROLEUM LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Prepared from the accounts without audit)
(All figures are in U.S. dollars, unless otherwise stated)
For the For the
Three-Month Three-Month
Period Ended Period Ended
March 31, March 31,
1998 1997
------------ ------------
REVENUE:
Oil and gas income $ 112,854 $ 179,196
Interest income 178,394 238,705
------------ ------------
291,248 417,901
------------ ------------
EXPENSES:
Oil and gas operating expenses 53,444 30,741
General and administrative 534,633 463,083
Depreciation, depletion
and amortization 85,166 94,777
Exchange (gain) loss (761) 19,102
------------ ------------
672,482 607,703
------------ ------------
NET LOSS BEFORE INCOME TAXES (381,234) (189,802)
RECOVERY OF INCOME TAXES - 66,431
------------ ------------
NET LOSS (381,234) (123,371)
RETAINED DEFICIT,
beginning of period (1,109,316) (224,975)
------------ ------------
DEFICIT, end of period $ (1,490,550) $ (348,346)
------------ ------------
------------ ------------
NET LOSS PER SHARE:
Basic $ (.04) $ (.01)
------------ ------------
------------ ------------
Fully diluted $ (.04) $ (.01)
------------ ------------
------------ ------------
The accompanying notes are an integral part of these consolidated
financial statements.
PENDARIES PETROLEUM LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(Prepared from the accounts without audit)
(All figures are in U.S. dollars, unless otherwise stated)
For the For the
Three-Month Three-Month
Period Ended Period Ended
March 31, March 31,
1998 1997
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (381,234) $ (189,802)
Items not affecting cash-
Depreciation, depletion
and amortization 85,166 94,777
Change in noncash working
capital items-
Accounts receivable (54,101) (269,552)
Accounts payable (47,296) (201,433)
Accrued liabilities 106,941 (63,421)
Prepaids and other
working capital items (21,221) 8,913
------------ ------------
Net cash used in
operating activities (311,745) (620,518)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to unproved oil
and gas properties, net (1,511,813) (1,187,702)
Additions to other property
and equipment (19,880) (12,318)
------------ ------------
Net cash used
in investing
activities (1,531,693) (1,200,020)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issue
of common stock - 3,118,384
Net proceeds from exercise
of common stock options 29,500 -
Cumulative translation effects 12,886 -
------------ ------------
Net cash provided by
financing activities 42,386 3,118,384
------------ ------------
DECREASE IN CASH
AND CASH EQUIVALENTS (1,801,052) 1,297,846
CASH AND CASH EQUIVALENTS,
beginning of period 15,133,285 17,973,455
------------ ------------
CASH AND CASH EQUIVALENTS,
end of period $ 13,332,233 $ 19,271,301
------------ ------------
------------ ------------
The accompanying notes are an integral part of these consolidated
financial statements.
PENDARIES PETROLEUM LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Prepared from the accounts without audit)
(All figures are in U.S. dollars, unless otherwise stated)
1. NATURE OF OPERATIONS:
Pendaries Petroleum Ltd. (Pendaries or the Company) is a holding
company whose primary interests are in exploration, development
and production of oil and gas properties in the People's Republic
of China.
2. BASIS OF PRESENTATION AND
PRINCIPLES OF CONSOLIDATION:
The Company completed an initial public offering and became a
public company on December 12, 1996.
The consolidated financial statements included herein have been
prepared by Pendaries without audit and reflect all adjustments
which are, in the opinion of management, necessary to present a
fair statement of the results of the interim period. These
statements are presented on a basis consistent with the annual
audited consolidated financial statements. Certain information,
accounting policies and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been omitted,
although the Company believes that the disclosures are adequate
to make the information presented not misleading. These
consolidated financial statements should be read in conjunction
with the consolidated financial statements and the summary of
significant accounting policies and notes thereto included in the
Company's latest annual financial statements (see Note 4).
The consolidated financial statements include the accounts of
Pendaries, Pendaries Productions, Inc., Sino-American Energy
Corporation (Sino-American) and Sino-American Overseas Energy
Corporation. All significant intercompany transactions and
balances have been eliminated.
3. COMMON STOCK:
Issuance of Options
In January 1998, certain directors and officers of Pendaries were
granted common stock options for a total of 79,500 common shares.
The common stock options expire on January 8, 2003, at an
exercise price of $10.75 Canadian dollars per common share.
Stock Option Legal Proceeding
In connection with the inability to resolve a dispute with the
former president of Sino-American between mid-1994 and March 1996
over the number of stock options to which the former president is
entitled, the parties met for mediation on February 16, 1998. As
a result, the parties agreed in principle to a settlement of
$450,000, and an extension of the term of the 100,000 options
originally granted by approximately one and a half years, which
the board of directors subsequently approved. On April 23, 1998,
the settlement agreement was executed. As such, the second
quarter of 1998 will reflect this charge.
Exercise of Options
In the first quarter of 1998, 28,000 common stock options were
exercised for net proceeds of $29,500.
4. PRIOR-YEAR COMPARATIVE FIGURES:
The consolidated financial statements for the year ended December
31, 1997, were audited by Arthur Andersen & Co., which issued an
auditors' report without reservation dated January 16, 1998.
5. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
These consolidated financial statements are expressed in U.S.
dollars and are prepared in accordance with generally accepted
accounting principles in Canada ("Canadian GAAP") which conform
in all material respects with those in the United States ("U.S.
GAAP") for the years presented.
In Canada, if the net capitalized costs of oil and gas properties
in a cost center exceed an amount equal to the sum of estimated
future net revenues from proved oil and gas reserves in the cost
center and the costs of properties not being amortized, both
adjusted for income tax effects, such excess is charged to
expense. Also, the total capitalized costs of all cost centers
are subject to a further recoverability test which includes,
among other things, provisions for site development and
restoration, future general, administrative and financial costs.
This in not consistent with U.S. GAAP. For U.S. GAAP, Pendaries
limits, on a country-by-country basis, the capitalized costs of
proved oil and gas properties, net of accumulated DD&A, to the
estimated future net cash flows from proved oil and gas reserves,
net of related tax effects, discounted at 10 percent. If
capitalized costs exceed this limit, the excess is charged to
DD&A expense. Included in the estimated future net cash flows are
Canadian provincial tax credits expected to be realized beyond
the date at which the legislation, under its provisions, could be
repealed. To date, the Canadian provincial government has not
indicated an intention to repeal this legislation. This
difference between Canadian and U.S. GAAP has not been material
to the consolidated financial statements to date. |
