KFG Year End Results, Ending April 30th 2014
This will be the last year KFG produces at less than 100bopd. Given the new rates which started early June and new reservoir discovery over July, the company is easily producing at double the average for 2013. Q1 results will be out in exactly a month which will show a significant increase from last year's Q1 and Q4, then Q2 will be even higher given the payout times. Every quarter KFG should be increase in production from now on.
Price: $0.10
Shares Outstanding: 50,584,144
Insider Holdings: 10%
Options and warrants: 0
Financials
Assets
Cash: $1,205,750
Accounts Receivable: $577,215
Marketable Securities: $476
Prepaid Expenses: $14,486
Reclamation Bond: $20,000
Property and Equipment: $1,199,375
Total Assets: $3,017302
Liabilities
Accounts Payable: $700,604
Deposits from Co-owners: $178,978
Total Liabilities: $879,582
-Assets grew by $500,000 year over year. Then if you include the reserve growth and new potential, it's been a real transition of a year.
- The reason for the drop in oil revenues is very easy to explain. When KFG's main property paid out last year, the interest went from 100% to 75%. This loss was made up over 2013 but it took some time. Now of course we have exceeded it by quite a bit.
Revenue
(2013)Oil and gas: $2,240,754 (2012)$2,925,253
(2013)Management Fees: $419,014 (2012)$120,626
(2013)Expenses: $2,586,411 (2012)$2,961,875
(2013)Net Income: $67,467 (2012)$76,164
(2013)EPS: $0.0013c (2012)$0.0015c
Overall not bad given the circumstances over the year. Oil revenue was down quite a bit, but we picked up on the management side, going from 15 wells to 22 and now 24 in production with many more to do.
MD&A Highlights
Overall the Company has recovered from giving up 25% of its interested in the Fayette Field wells at payout. Currently, with the MacNeil wells and Craig wells at payout, revenues are on a growth pattern again. The Company was able to grow just utilizing cash flow. Several new projects are in the pipeline and the Craig #3 well will payout in the next few months increasing that revenue stream. KFG will have no problems financing growth through its internal cash flow throughout the remainder of its fiscal year ending April 30, 2015.
For the year ended April 30, 2014, the Company had cash flow from oil and gas production of $1,482,016, compared to $1,823,195 for the year ended April 30, 2013. Oil production decreased from 92.02 BOPD to 71.79 BOPD, and gas production
decreased 3 MCF per day. The average price increased $1.06 per MCF and the average price of crude oil decreased $3 per bbl when comparing the year ended April 30, 2014 to April 30, 2013.
Revenue from the sale of oil and gas was $2,240,754 for the year ended April 30, 2014, compared to $2,925,253 for the year ended April 30, 2013. The decrease in revenue is a result of lower prices and production primarily because oil revenues at Fayette were reduced by approximately 25% when the property paid out and triggered a revision of KFG’s interest from 100% to 74.9%.
Management fee revenue for the year ended April 30, 2014 was $419,014 as compared to $120,626 for the year ended April 30, 2013. The increase is a result of all of the wells drilled during the year. Overhead charges are for the drilling and completion of wells. Also, each new well incurred monthly overhead charges to operate the wells. KFG also received overhead charges on wells operated for other parties.
The Company reported a net income of $67,467 for the year ended April 30, 2014 compared to net income of $76,164 for the year ended April 30, 2013, with the decrease in net income a result of lower production rates during the year and an increase in general and administration expenses.
In April 2013, the Dale lease went off production just after the Fayette wells paid out – reducing the Company’s interest by 25% as a result production and prices fell. In August 2013, the MacNeil #3 helped get production back on track, but bad weather and price weakness hampered production. IN November 2013,, Craig #1 went on production and in February 2014, the Craig #2 went on production. But the Dale lease was still shut in. As of late March 2014, the Parker #4 went on production. The Dale lease went back on production in April 2014. Three events have occurred recently. The MacNeil #2 and #3 paid out and KFG’s interest went to 21.5% from 8% and the Craig #1 and #2 paid out and KFG’s interest went to 21.5% from 10%. And lastly, the Craig #3 was put on production (KFG’s interest is 10% until payout). The quarter ended April 30, 2014 benefited from all the field work as overhead income increased substantially.
Liquidity and Capital Resources
The Company’s main sources of liquidity are internally-generated cash flow from its oil and gas operations and access to equity capital markets. Because KFG’s internally-generated cash flow is presently sufficient to fund its overall operating expenses, the Company will not require continued additional funding in order to execute on its business strategy. The Company anticipates that public capital markets will serve as the principal source of capital to finance its future oil and gas activities and/or significant property purchases. Changes in the capital markets, including a decline in the prices of natural gas
and oil, could materially and adversely impact on KFG’s ability to complete further equity financings, with the result that the Company may be forced to scale back its operational activities.
Fourth Quarter
In February 2014, the Craig #2 well was put on production. Initial production was 80 BOPD throughout the quarter. In March 2014, the Parker #3 and Parker #4 were put on production producing a combined total of 100 BOPD. KFG has a 21.5% working interest in the Craig #2 well and a 10% working interest in the Parker wells. Also the Dale lease in Louisiana was put back on production for 25 BOPD. KFG’s interest in those wells averaged 18% at April 30, 2014. The Craig and Parker wells are in Adams Co., Mississippi.
Outlook
Production at Fayette is stable and has started a slow decline. With the Dale lease back on production and new production coming off the Craig and Parker leases, KFG will have adequate internal cash flow to develop existing leases as well as support several new prospects in the coming months. Unless the price of oil collapses, the Company will generate sufficient capital to fund its requirements throughout 2014 internally.
