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 June 30, 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 June 30, 2005, was 7,827,297.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS FOR THIRD FISCAL QUARTER 2005
PERIOD ENDING JUNE 30, 2005
PIONEER OIL AND GAS
Balance Sheet
June 30, 2005
(unaudited)
Assets
Current assets:
Cash $ 4,077,834
Marketable securities, available for sale 31,714
Accounts receivable 212,532
Resale leases, at lower of cost or market 2,755,139
-----------
Total current assets 7,077,219
Property and equipment - net (successful efforts method) 580,049
Other assets 2,230
-----------
$ 7,659,498
===========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 1,198,531
Accrued expenses 28,566
Income tax payable 860,000
--------
Total current liabilities 2,087,097
-----------
Deferred income tax 334,000
Asset retirement obligation 161,911
-----------
Total Liabilties 2,583,008
-----------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.001 per share, authorized
50,000,000 shares: 7,827,297 shares issued
and outstanding 7,827
Additional paid-in capital 2,347,679
Stock subscription receivable (184,571)
Unrealized holding gain 31,714
Retained earnings 2,873,841
---------
Total stockholder's equity 5,076,490
-----------
$ 7,659,498
===========
PIONEER OIL AND GAS
Statement of Operations
Three Months Ended June 30,
(unaudited)
2005 2004
----------- -----------
Revenue:
Oil and gas sales $ 335,211 $ 248,117
Royalty revenue 192,746 195,136
Operational reimbursements 1,500 1,500
Project and lease sales income, net 2,211,651 18,750
----------- -----------
2,741,108 463,503
----------- -----------
Costs and expenses:
Cost of operations 187,778 137,727
General and administrative expenses 94,929 73,204
Exploration costs 44,902 66,248
Lease rentals 9,361 14,498
Depreciation, depletion and amortization 23,094 32,433
----------- -----------
360,064 324,110
----------- -----------
Income from operations 2,381,044 139,393
----------- -----------
Other income (expense):
Interest expense (190) -
Other income 5,933 (739)
----------- -----------
Net other income 5,743 (739)
----------- -----------
Income before provision for
income taxes 2,386,787 138,654
Provision for income taxes (930,000) -
----------- -----------
Net income $ 1,456,787 $138,654
----------- -----------
Earnings per share - Basic $ .19 $ .02
----------- -----------
Diluted $ .18 $ .02
----------- -----------
Weighted average common shares - Basic 7,870,000 7,913,000
----------- -----------
Diluted 8,232,000 7,913,000
----------- -----------
PIONEER OIL AND GAS
Statement of Operations
Nine Months Ended June 30,
(unaudited)
2005 2004
----------- -----------
Revenue:
Oil and gas sales $ 865,290 $ 657,647
Royalty Revenue 691,488 533,397
Operational reimbursements 4,500 4,500
Project and lease sales income, net 4,472,180 37,500
----------- -----------
6,033,458 1,233,044
Costs and expenses:
Cost of operations 569,103 459,973
General and administrative expenses 293,354 254,115
Exploration costs 182,230 157,527
Lease rentals 27,791 48,458
Depreciation, depletion and amortization 62,280 87,299
----------- -----------
1,141,758 1,007,372
Income from operations 4,891,700 225,672
Other income (expense):
Interest expense (1,457) -
Other income 111,772 20,767
----------- -----------
Net other income 110,315 20,767
----------- -----------
Income before provision
for income taxes 5,002,015 246,439
Provision for income taxes (1,384,000) -
----------- -----------
Net income $ 3,618,015 $ 246,439
----------- -----------
Earnings per share - Basic $ .46 $ .03
----------- -----------
Diluted $ .44 $ .03
----------- -----------
Weighted average common shares - Basic 7,898,000 7,938,000
----------- -----------
Diluted 8,250,000 7,938,000
----------- -----------
PIONEER OIL AND GAS
Statement of Cash Flows
For The Nine Months Ended June 30,
(unaudited)
2005 2004
----------- -----------
Cash flows from operating activities:
Net income $ 3,618,015 $ 246,439
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on assets sold or abandoned 167,645 -
Depreciation, depletion and amortization 69,280 84,500
Employee benefit plan expense 25,198 20,698
Interest income (6,110) (6,958)
Deferred income taxes 334,000 -
Accretion expense 3,561 -
(Increase) decrease in:
Accounts receivable 88,918 (343,663)
Resale leases (1,702,847) (715,769)
Other assets - 230
Increase (decrease) in:
Accounts payable 1,090,323 1,060,395
Accrued expenses 1 5,283
Income taxes payable 860,000 -
Advances on drilling costs (556,573) -
----------- -----------
Net cash provided by
operating activities 3,991,411 351,155
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (279,005) (27,429)
----------- -----------
Net cash used in investing activities (279,005) (27,429)
----------- -----------
Cash flow from financing activities:
Acquisition and retirement of common stock (125,662) (21,945)
----------- -----------
Net cash used in financing activities (125,662) (21,945)
----------- -----------
Net increase in cash 3,586,744 301,781
Cash, beginning of period $ 491,090 $ 371,527
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Cash, end of period $ 4,077,834 $ 673,308
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PIONEER OIL AND GAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended June 30, 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 nine months ended June 30, 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 June 30, 2005 and the results of operations for
the three and nine months ended June 30, 2005 and 2004 and the cash flows
for the nine months ended June 30, 2005 and 2004. The results of operations
for the three and nine months ended June 30, 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 nine months ended June 30, 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 $1,194,000, which included
a current liability of $860,000 and a deferred liability of $334,000.
(4) During the nine months ended June 30, 2005, the company recorded
interest income (on the stock subscription receivable) of $6,110 reduced
the stock subscription receivable by $19,088 and recorded an employee
benefit plan contribution of $25,198
NOTE 2 - MARKETABLE SECURITIES
During the nine months ended June 30, 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 June 30, 2005 of $31,714.
NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
During the nine months ended June 30, 2005, 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 June, 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 third fiscal quarter increased from $463,503 in fiscal
2004 to $2,741,108 in fiscal 2005. For the nine-month period revenues increased
from $1,233,044 to $6,033,458. The increase in revenue for the three-month and
nine-month periods was primarily due to greatly increased lease sales income.
Project and lease sale income increased from $18,750 to $2,211,651 for the three
month period and from $37,500 to $4,472,180 for the ninth month period. The
project and lease sale income for the three month period was primarily due to
the sale of leases in our central Utah play although the Company also netted $
364,088 on the sale of some coalbed methane leases near Price, Utah.
Total oil and gas sales (including royalty revenue) increased 31 percent from
$443,253 to $527,957 in the third quarter and 31 percent from $1,191,044 to
$1,556,778 for the nine-month period. These increases were due primarily to
increased product prices. Average oil prices for the quarter increased from
$34.19 bbl to $45.90 bbl while gas prices increased from $5.02 MCF to $5.88 MCF.
For the nine-month period, average oil prices increased from $30.58 bbl to
$32.95 bbl while gas prices increased from $4.73 to $5.98. Gas production for
the nine-month period increased by 6 percent primarily due to increased
production on our Hunter Mesa properties. Oil production was unchanged for the
nine-month period. For the three-month period oil production increased two
percent while gas production decreased 3 percent.
Project and lease sales income for the nine-month period increased from $37,500
in 2004 to $4,472,180 in 2005. As mentioned this was primarily due to the sale
of leases in our central Utah play.
Costs of operations increased from $137,727 to $187,778 for the quarter and
increased from $459,973 to $569,103 for the nine-month period. These changes
were primarily due to variations in payments to working interest partners due to
varying production and product prices.
General and administrative expenses increased from $73,204 to $94,929 for the
quarter and increased from $254,115 to $293,354 for the nine-month period.
The Company's net income for the third quarter (fiscal 2005) was $1,456,787
compared to net income of $138,654 for the third fiscal quarter 2004. For the
nine-month period (fiscal 2005) the Company posted net income of $3,618,015
compared to a net income of $246,439 for fiscal 2004.
Liquidity and Capital Resources
During the nine-months of fiscal 2005 cash provided by operating activities was
$3,991,411 while investing activities required $279,005. Net cash used in
financing activities was $125,662.
Cash provided by operating activities for the nine-months of fiscal 2004 was
$351,155. Cash provided by operating activities for the same period for fiscal
2005 was $3,991,411.
Pioneer's acreage position in the central Utah overthrust area consists of
approximately 161,000 gross and 53,000 net acres.
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
None
Item 5 - Other Information
The Company filed form DEF 14A on July 28, 2005 containing definitive proxy
materials detailing a planned reverse stock split and plans for the Company
to deregister with the SEC making the Company no longer a fully reporting
company as of September 26, 2005. A mailing to all shareholders of record
as of August 4, 2005 containing these definitive proxy materials is in
progress.
Item 6 - Exhibits and Reports on Form 8-K
(a) There are no exhibits with this report.
(b) The registrant filed a report on Form 8-K on May 5, 2005 detailing the
Company's plans to deregister with the SEC.
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: August 12, 2005 /s/ Don J. Colton
-------------------------------
President and Chief Executive Officer
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.
6. I have indicated in this annual 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 the most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
DATE: August 12, 2005
/s/ Don J. Colton
-----------------------
Don J. Colton, President
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 June 30, 2004 (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
August 12, 2005