SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
____
--------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the quarterly period ended March 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 0-30472
PIONEER OIL AND GAS
Incorporated pursuant to the Laws of the State of Utah
Internal Revenue Service - Employer Identification No. 87-0365907
1206 W. South Jordan Parkway, Unit B
South Jordan, Utah 84095-5512
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 ___
The total number of shares of the registrant's Common Stock, $.001 par value,
outstanding on March 31, 2005, was 7,910,802.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS FOR SECOND FISCAL QUARTER 2005
PERIOD ENDING MARCH 31, 2005
PIONEER OIL AND GAS
Balance Sheet
March 31, 2005
(unaudited)
Assets
Current assets:
Cash $ 1,002,119
Marketable securities, available for sale 36,039
Accounts receivable 203,553
Resale leases, at lower of cost or market 2,540,349
-----------
Total current assets 3,782,060
Property and equipment - net (successful efforts method) 656,873
Other assets 2,230
-----------
$ 4,441,163
===========
----------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 50,492
Accrued expenses 28,781
Income taxes payable 176,000
-----------
Total current liabilities 255,273
Deferred income tax 278,000
Asset retirement obligation 160,724
-----------
Total Liabilities 693,997
-----------
Commitments and contingencies -
Stockholders' equity:
Common stock, par value $.001 per share, authorized
50,000,000 shares: 7,910,802 shares issued and
outstanding 7,910
Additional paid-in capital 2,470,734
Stock subscription receivable (184,570)
Unrealized holding gain 36,039
Retained earnings 1,417,053
-----------
Total stockholder's equity 3,747,166
-----------
$ 4,441,163
===========
The accompanying notes are an integral part of these financial statements.
PIONEER OIL AND GAS
Statement of Operations
Six Months Ended March 31,
(unaudited)
2005 2004
----------- -----------
Revenue:
Oil and gas sales $ 530,079 409,530
Royalty Revenue 498,743 338,262
Operational reimbursements 3,000 3,000
Project and lease sales income 2,260,528 18,750
----------- -----------
3,292,350 769,542
----------- -----------
Costs and expenses:
Cost of operations 381,325 322,247
General and administrative expenses 198,425 180,911
Exploration costs 137,328 91,279
Lease rentals 18,430 33,960
Depreciation, depletion and amortization 46,186 54,866
----------- -----------
781,694 683,263
----------- -----------
Income from operations 2,510,656 86,279
----------- -----------
Other income (expense):
Interest expense (1,267) -
Other income 105,838 21,506
----------- -----------
Net other income 104,571 21,506
----------- -----------
Income before provision
for income taxes 2,615,227 107,785
Provision for income taxes 454,000 -
----------- -----------
Net Income $ 2,161,227 107,785
=========== ===========
Earnings per share:
Basic $ .27 .01
=========== ===========
Diluted $ .26 .01
============ ===========
Weighted average common shares:
Basic 7,912,000 7,950,000
=========== ===========
Diluted 8,259,000 7,950,000
=========== ===========
The accompanying notes are an integral part of these financial statements.
PIONEER OIL AND GAS
Statement of Operations
Three Months Ended March 31,
(unaudited)
2005 2004
----------- -----------
Revenue:
Oil and gas sales $ 226,996 205,977
Royalty Revenue 293,380 159,993
Operational reimbursements 1,500 1,500
Project and lease sales income 2,260,528 -
----------- -----------
2,782,404 367,470
----------- -----------
Costs and expenses:
Cost of operations 238,345 140,341
General and administrative expenses 111,341 101,448
Exploration costs 80,096 46,036
Lease rentals 6,013 5,193
Depreciation, depletion and amortization 23,093 37,433
------------ -----------
458,888 330,451
------------ -----------
Income from operations 2,323,516 37,019
--------- -----------
Other income (expense):
Interest expense (677) -
Other income 21,550 8,058
------------ -----------
Net other income 20,873 8,058
------------ -----------
Income before provision
for income taxes 2,344,389 45,077
Provision for income taxes 454,000 -
------------ -----------
Net Income $ 1,890,389 45,077
========= ===========
Earnings per share:
Basic $ .24 .01
============ ===========
Diluted $ .23 .01
============ ===========
Weighted average common shares:
Basic 7,912,000 7,938,000
============ ===========
Diluted 8,281,000 7,938,000
============ ===========
The accompanying notes are an integral part of these financial statements.
PIONEER OIL AND GAS
Statement of Cash Flows
Six Months Ended March 31,
(unaudited)
2005 2004
----------- -----------
Cash flows from operating activities:
Net income $ 2,161,227 107,785
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Loss on assets sold, abandoned, and dry hold costs 112,321 -
Depreciation, depletion and amortization 46,186 54,866
Employee benefit plan expense 25,199 20,698
Interest income (6,110) (6,958)
Deferred income taxes 278,000 -
Accretion expense 2,374 -
(Increase) decrease in:
Accounts receivable 97,897 (7,003)
Resale leases (1,488,057) (130,568)
Other assets - 230
Increase (decrease) in:
Accounts payable (57,716) (83,954)
Accrued expenses 216 2,173
Income taxes payable 176,000 -
Advances on drilling costs (556,573) -
------------ -----------
Net cash provided by (used in)
operating activities 790,964 42,731
------------ -----------
Cash flows from investing activities:
Acquisition of property and equipment (277,411) (25,423)
------------ -----------
Net cash used in investing activities (277,411) (25,423)
------------ -----------
Cash flow from financing activities:
Acquisition and retirement of Common Stock (2,524) (21,314)
------------ -----------
Net cash provided by(used in) financing activities (2,524) (21,314)
------------ -----------
Net increase (decrease) in cash 511,029 (89,468)
Cash, beginning of year 491,090 371,527
------------ -----------
Cash, end of second quarter $ 1,002,119 282,059
============ ===========
The accompanying notes are an integral part of these financial statements.
PIONEER OIL AND GAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended March 31, 2005
(Unaudited)
NOTE 1 - UNAUDITED INTERIM INFORMATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Regulation
SB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six months ended March 31, 2005
are not necessarily indicative of the results that may be expected for the year
ending September 30, 2005. For further information, refer to the financial
statements and footnotes thereto included in the Company's Form 10KSB for the
year ended September 30, 2004.
(1) The unaudited financial statements include the accounts of Pioneer Oil
and Gas and include all adjustments (consisting of normal recurring items)
which are, in the opinion of management, necessary to present fairly the
financial position as of March 31, 2005 and the results of operations for
the three and six months ended March 31, 2005 and 2004 and the cash flows
for the six months ended March 31, 2005 and 2004. The results of operations
for the three and six months ended March 31, 2005 are not necessarily
indicative of the results to be expected for the entire year.
(2) Earnings per common share is based on the weighted average number of
shares outstanding during the period.
(3) During the six months ended March 31, 2005, the Company generated net
income sufficient to utilize all of the NOL carryforwards. In addition, the
Company recorded a provision for income taxes of $454,000, which included a
current liability of $176,000 and a deferred liability of $278,000.
NOTE 2 - MARKETABLE SECURITIES
During the six months ended March 31, 2005, the Company sold marketable
securities with no cost basis for approximately $78,000. The gain on this sale
is included in "other income" in the statement of operations. The Company
continues to hold approximately 144,000 shares of these securities with a market
value at March 31, 2005 of $36,039.
NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
During the six months ended March 31, 2005, the Company recorded an unrealized
holding gain on marketable securities of $36,039.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Period Ending March 31, 2005)
Unaudited financial data
The discussion and analysis contained herein should be read in conjunction with
the preceding financial statements and the information contained in the
Company's 10KSB. Except for the historical information contained herein, the
matters discussed in this 10 QSB contain forward looking statements within the
meaning of Section 27a of the Securities Act of 1933, as amended, and Section
21e of the Securities Exchange Act of 1934, as amended, that are based on
management's beliefs and assumptions, current expectations, estimates, and
projections. Statements that are not historical facts, including without
limitation statements which are preceded by, followed by or include the words
"believes," "anticipates," "plans," "expects," "may," "should," or similar
expressions are forward-looking statements. Many of the factors that will
determine the company's future results are beyond the ability of the Company to
control or predict. These statements are subject to risks and uncertainties and,
therefore, actual results may differ materially. All subsequent written and oral
forward-looking statements attributable to the Company, or persons acting on its
behalf, are expressed qualified in their entirety by these cautionary
statements. The Company disclaims any obligation to update any forward-looking
statements whether as a result of new information, future events or otherwise.
Important factors that may include, but are not limited to: the risk of a
significant natural disaster, the inability of the Company to insure against
certain risks, fluctuations in commodity prices, the inherent limitations in the
ability to estimate oil and gas reserves, changing government regulations, as
well as general market conditions, competition and pricing, and other risks
detailed from time to time in the Company's SEC reports, copies of which are
available upon request from the Company.
Results of Operations -
Total Revenue for the second fiscal quarter increased 657 percent from $367,470
in fiscal 2004 to $2,782,404 in fiscal 2005. For the six-month period revenues
increased 328 percent from $769,542 to $3,292,350. The increase in revenues for
both the three-month period and the six-month period were due primarily to
substantial lease sales. The Company sold the remainder of its Uinta Basin
Overpressured Gas prospect and the first phase of its central Utah play. The
company anticipates receiving substantially higher revenues and profits in
fiscal 2005 and early fiscal 2006 than is normal; these are expected to be
unusual and associated with the central Utah play and not to be expected on a
continuing basis.
Project and lease sales income for the six-month period increased from $18,750
for fiscal 2004 to $2,260,528 for 2005, all of the income in fiscal 2005 coming
in the second quarter. As mentioned above this income was from the sales of some
of our Utah properties.
Total oil and gas sales (including royalty revenue) increased from $365,970 to
$520,376 in the second quarter and from $747,792 to $1,028,822 for the six-month
period. These increases were due primarily to increased oil and gas prices.
Average oil prices for the quarter increased from $30.47 bbl to $42.17 bbl while
gas prices increased from $5.06 MCF to $6.16 MCF. For the six-month period,
average oil prices increased from $28.48 bbl to $36.45 bbl while gas prices
increased from $4.58 to $6.03.
Costs of operations increased from $140,341 to $238,345 for the quarter and
increased from $322,247 to $381,325 for the six-month period primarily due to
higher payments to working interest partners due to higher product prices.
General and administrative expenses increased from $101,448 to $111,341 for the
quarter and increased from $180,911 to $198,425 for the six-month period.
The Company's net income for the second quarter (fiscal 2005) was $1,890,389
compared to net income of $45,077 for the second fiscal quarter 2004. For the
six-month period (fiscal 2005) the Company posted net income of $2,161,227
compared to a net income of $107,785 for fiscal 2004.
Liquidity and Capital Resources
During the first six-months of fiscal 2005 cash provided by operating activities
was $790,964 and cash used in investing activities required $277,411. Financing
activities used $2,524 in cash.
Cash used in operating activities was primarily for the purchase of resale
leases of $1,488,057. Cash used in investing activities increased from $25,423
(fiscal 2004) to $277,411 (fiscal 2005).
ITEM 3. CONTROLS AND PROCEDURE
Within the 90 days prior to this report, we carried out an evaluation, under the
supervision and with the participation of management, including our principal
financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the principal executive and principal financial officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company required to be
included in our periodic SEC filings. There have been no significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
The Company may become or is subject to investigations, claims, or
lawsuits ensuing out of the conduct of its business, including those
related to environmental safety and health, commercial transactions
etc. The Company is currently not aware of any such items, which it
believes could have a material adverse affect on its financial
position.
Item 2 - Changes in Securities
None.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has filed forms SC 13E3 and Pre 14A for the intention of
going private in order to reduce compliance costs associated with new
public company rules. The SEC is currently reviewing these filings.
The Company intends to submit some of these matters to a vote of the
security holders as outlined in these filings.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
Exhibit No. Description
31 Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of
1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32 Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
REPORTS ON FORM 8-K
(b) The registrant filed an 8K on February 8, 2005 regarding its central
Utah project and the results of its Yankee well; and an 8K on February 23,
2005 regarding the sale of a portion of the central Utah project and the
remainder of its Uinta Basin Overpressured Gas Prospect. No other 8K
filings were made during the quarter ending March 31, 2005. However, the
registrant also filed an important 8K on May 5, 2005 regarding the
registrant seeking to go private by purchasing the stock of all
shareholders with less than 2000 shares. Details can be found in the
registrant's SC 13E3 and Pre 14A filings.
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.
Pioneer Oil and Gas
Dated: May 13, 2005 /s/ Don J. Colton
-------------------------------
President and Chief Executive Officer
Exhibit 31
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Don J. Colton, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Pioneer Oil and Gas.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. I have disclosed, based on the most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls.
DATE: May 13, 2005
/s/ Don J. Colton
-----------------------
Don J. Colton, President
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report of Pioneer Oil and Gas
(the "Company") on Form 10-QSB for the period ended March 31, 2005 (the
"Report"), I, Don J. Colton, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(i) The Report fully complies with the requirements of section 13(a) of the
Securities Exchange Act of 1934; and
(ii) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Don J. Colton
-------------------------
Don J. Colton
Chief Executive Officer
May 13, 2005