Management
12-Feb-2010
Quarterly Report
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
INTRODUCTION
The following discussion is intended to facilitate an understanding of our business and results of operations and includes forward-looking statements that reflect our plans, estimates and beliefs. It should be read in conjunction with our audited consolidated financial statements and the accompanying notes to the consolidated financial statements included herein. Our actual results could differ materially from those discussed in these forward-looking statements.
The Company has never earned a profit, and has incurred an accumulated deficit of $13,564,808 as of December 31, 2009. As of September 30, 2006, the Company had raised $1,240,000 in equity. The Company has used these funds to purchase or place deposits on three oil and gas fields to begin its operations as an oil and gas exploration and production company. Revenues derived from the planned production and sale of oil will be based on the evaluation and development of fields. If our development plan is successful, it is estimated it will take approximately one year to reach production levels to sufficiently capitalize the Company on an ongoing basis. During this initial ramp up period, the Company believes it will need to raise additional funds to fully develop its fields, purchase equipment and meet general administrative expenses. The Company may seek both debt and equity financing. The Company currently has in excess of forty nine wells located on the two fields located in Texas. Each of the wells will need to be reworked to establish production at a cost of approximately $7,000 to $10,000 per well. Initial production from each well is estimated to be between two to five barrels per day. Once initial production has been
established the Company intends to begin a water flood program that injects water into the oil producing zone through injector wells. The water then forces the oil towards the producing well and, if successful, may increase production of each well up to an estimated four to seven barrels per day per well. If the Company is able to produce its wells upon the re-completion the Company revenues will exceed current operating expenses if 40 barrels of oil is produced and the price of oil remains above $55.00 per barrel. The Company's success is dependent on if and how quickly it can reach these levels of production. The Company plans to use all revenues for general corporate purposes as well as, future expansion of its current oil producing properties and the acquisition of other oil and gas properties. There is no certainty that the Company can achieve profitable levels of production or that it will be able to raise additional capital through any means.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2009 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
2008
REVENUES FROM OPERATIONS
Revenues for the three months ended December 31, 2009 and 2008 were $6,406 and $449 respectively. On December 5, 2004, the Company began to structure itself into an oil and gas production and exploration company. The Company has acquired three oil and gas leases in the counties of Eastland and Callahan, Texas and has begun development of oil and gas. The Company received its first revenues from oil and gas operations in March 2008. The Company believes that it will place additional wells into operation during the current fiscal year. Since it ceased its former business operations, the Company has devoted its efforts to research prospective leases and business combinations and secure financing.
EXPENSES FROM CONTINUING OPERATIONS
The Company operating expenses for the three months ended December 31, 2009 were $232,626. The current quarter operating expenses represent a negative variance of $62,641 when compared to operating expenses of $169,985 for the quarter ended December 31, 2008. Higher stock based compensation in the current quarter account for a negative variance of $177,500 when compared to the same quarter the prior year. The stock based compensation arose from Company stock issued for Investor relation services. The negative variance was partially offset by lower legal fees ($84,000), lower contract labor ($17,300) and, lower travel expense ($5,632).
NET INCOME/LOSS
For the quarter ended December 31, 2009, the Company had a net loss of $258,509 representing a negative variance of $59,112 when compared to a net loss of $199,397 for the quarter ended December 31, 2008. The negative variance as noted above in "Expenses from Continuing Operations" resulted from higher stock issued compensation partially offset by lower legal fees and lower travel expenses.
