SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
____
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FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the quarterly period ended December 31, 2004
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 February 11, 2005, was 7,911,727.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements for First Fiscal Quarter 2005 Period Ending
December 31, 2004.
PIONEER OIL AND GAS
Balance Sheet
December 31, 2004
(unaudited)
Assets
Current assets:
Cash $ 532,403
Marketable securities available for sale 31,714
Accounts receivable 255,607
Resale leases, at lower of cost or market 1,412,604
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Total current assets 2,232,328
Property and equipment - net (successful efforts method) 582,595
Other assets 2,230
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$ 2,817,153
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 174,135
Accrued expenses 28,553
Line of credit 200,000
Deposits 100,000
Advances on drilling costs 319,915
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Total current liabilities 822,603
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Asset Retirement Obligation 159,537
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Commitments and contingencies -
Stockholders' equity:
Common stock, par value $.001 per share, authorized
50,000,000 shares: 7,911,727 shares issued and
outstanding 7,911
Additional paid-in capital 2,472,383
Stock subscription receivable (203,659)
Unrealized holding gain 31,714
Accumulated deficit (473,336)
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Total stockholder's equity 1,835,013
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$ 2,817,153
The accompanying notes are an integral part of these financial statements.
PIONEER OIL AND GAS
Statement of Operations
First Fiscal Quarter Ending December 31,
(unaudited)
2004 2003
---------- ----------
Revenue:
Oil and gas sales $ 303,083 $ 201,041
Royalty Revenue 205,363 180,781
Operational reimbursements 1,500 1,202
Project and lease sales income - 18,750
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509,946 401,774
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Costs and expenses:
Cost of operations 142,980 181,906
General and administrative expenses 87,084 79,830
Exploration costs 57,232 44,876
Lease rentals 12,417 28,767
Depreciation, depletion and amortization 23,093 17,433
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322,806 352,812
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Income from operations 187,140 48,962
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Other income (expense):
Interest expense (590) -
Other income 84,288 13,746
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Net other income 83,698 13,746
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Income before provision
for income taxes 270,838 62,708
Provision for income taxes - -
---------- ----------
Net Income $ 270,838 $ 62,708
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Earnings per share - basic and diluted $ .03 $ .01
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Weighted average common shares - basic and diluted 7,912,000 7,961,000
The accompanying notes are an integral part of these financial statements.
PIONEER OIL AND GAS
Statement of Cash Flows
First Fiscal Quarter Ending December 31,
(unaudited)
2004 2003
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Cash flows from operating activities:
Net income $ 270,838 $ 62,708
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 23,093 17,433
Accretion expense 1,187 -
(Increase) decrease in:
Accounts receivable 45,843 74,996
Resale leases (360,312) (21,607)
Other assets - (73)
Increase (decrease) in:
Accounts payable 65,927 (15,892)
Accrued expenses (12) (132)
Deposits 100,000 -
Advances on drilling costs (236,658) -
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Net cash provided by (used in)
operating activities (90,094) 117,433
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Cash flows from investing activities:
Proceeds from sale of property - -
Acquisition of property and equipment (67,719) (7,374)
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Net cash used in investing activities (67,719) (7,374)
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Cash flow from financing activities:
Increase in Credit Line 200,000 -
Acquisition and retirement of Common Stock (874) (74)
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Net cash provided by (used in)
financing activities 199,126 (74)
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Net increase in cash 41,313 109,985
Cash, beginning of quarter 491,090 371,527
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Cash, end of quarter $ 532,403 $ 481,512
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The accompanying notes are an integral part of these financial statements.
PIONEER OIL AND GAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Fiscal Quarter Ending December 31,
(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
S-B. 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 month period ended December 31, 2004
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 December 31, 2004 and the results of operations and cash flows
for the three month period ended December 31, 2004 and 2003. The results of
operations for the three months ended December 31, 2004 are not necessarily
indicative of the result 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.
NOTE 2 - DEPOSITS
On December 23, 2004, the Company entered into an option agreement to sell
certain resale leases. The option agreement required the potential buyer to pay
a down payment during the option period. This amount is show in the financial
statements as a deposit.
On January 28, 2005, the Company entered into a definitive purchase and sale
agreement for these leases.
NOTE 3 - MARKETABLE SECURITIES
During the quarter ended December 31, 2004, 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 December 31, 2004 of $31,714.
NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION
During the quarter ended December 31, 2004, the Company recorded an unrealized
holding gain on marketable securities of $31,714.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Period Ending December 31, 2003)
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 first fiscal quarter increased 27 percent from $401,774 in
fiscal 2004 to $509,946 in fiscal 2005. The increase in revenue was due
primarily to an increase in oil and gas sales, and royalty revenue of $126,624.
No project and lease sales income occurred in the first fiscal quarter of 2005
as opposed to $18,750 in income for fiscal 2004.
Total oil and gas sales (including royalty revenue) increased from $381,822
(2004) to $508,446 (2005) in the first quarter. This increase was primarily due
to higher product prices. Average oil prices for the quarter increased over the
first quarter of fiscal 2004 from $26.98 bbl to $32.95 bbl while gas prices
increased from $4.20 MCF to $5.86 MCF. For the quarter oil production increased
38 percent due to more oil production on our Hunter Mesa property and gas
production was essentially unchanged.
Project and lease sales income for the quarter decreased from $18,750 to $0. The
Company expects substantial project and lease income from the partial sale of
our central Utah overthrust play next quarter.
Costs of operations decreased from $181,906 (2004) to $142,906 (2005) for the
quarter due to less repair costs associated with the producing properties.
General and administrative expenses increased from $79,830 to $87,084.
The Company's net income for the first quarter increased from $62,708 for fiscal
2004 to $270,838 for fiscal 2005 an increase of $208,130. Earnings per share for
the first quarter of fiscal 2005 were $.03. This compares to earnings of $.01
for the same period last year.
Liquidity and Capital Resources
During the first quarter of fiscal 2004 net cash used in operating activities
was $90,094 while investing activities used $67,719 in cash. Financing
activities provided $199,126 from utilization of the Company's line of credit.
One of the larger uses of cash was $360,312 for the purchase of resale leases to
increase the Company's inventory of acreage for future development and sale.
Cash at the end of the quarter increased from $481,512 (Dec. 31, 2003) to
$532,403 (Dec. 31, 2004).
ITEM 3 CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of its chief
executive officer/chief financial officer of the Company's disclosure controls
and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange
Act). Based upon this evaluation, the Company's chief executive officer/chief
financial officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Commission's rules and forms. There was no change in the Company's
internal controls or in other factors that could affect these controls during
the Company's last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
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 - Unregistered Sales of Equity Securities and Use of Proceeds
The Company during the quarter ending December 31, 2004, repurchased 1,017
common shares from shareholders desiring to sell directly to the Company.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
The following Exhibits are filed herewith:
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
During the quarter ending December 31, 2004, the Company filed one form 8K which
incorporated the press release of December 12, 2004. The press release updated
the shareholders on several projects the Company was working on and in
particular the Yankee Mine Well, the Overpressured Prospect and the Central Utah
acreage near the Wolverine discovery.
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: February 11, 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-15(e) and 15d-15(e) for the
small business issuer and have:
a) designed such disclosure controls or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the small business issuer is made known to us by
others particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the small business issuer's and presented
in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
c) disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting;
5. The small business issuer's other certifying officer(s) and I have disclosed,
based most recent evaluation, of internal control over financial reporting, to
the small business issuer's auditors and the audit committee of the small
business issuer's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which are reasonably likely to adversely affect the small business
issuer's ability to record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal controls over financial reporting.
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
DATE: February 11, 2005.
/s/ Don J. Colton
-----------------------
Don J. Colton, Chief Executive Officer
Chief Financial Officer
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 December 31, 2003 (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 and Chief Financial Officer
February 11, 2005