KFG Year End Results Ending April 30th 2015
Current Price: $0.08
Common Shares: 50,584,144
Insider Holdings: 16%
Before reading the financial results and management discussions below, one must take into consideration that KFG had quite a good year considering the three major setbacks that occurred. Oil production, cash, and management fee's are all up year over year, but the write down of oil assets which every single petroleum company had to do made KFG show a small net loss of less than $100,000. Without the $800,000 write down, KFG would of ended the year with positive net income. Despite this, drilling will move forward next month even at these lower prices, and with several wells to do, odds of production increasing are quite good.
Three Setbacks this year:
1) Price of oil which went from $110 to $40 and this is Louisiana Light Sweet Crude
2) Historic flooding in Mississippi which stopped some production and added extra costs
3) Several wild cat wells were dry which not only increased expenses, it added no value
4) KFG's best well Craig 5 did not start pumping until after the fourth quarter ended
Financial Results Ending April 30th 2015
**My Note: All numbers are in US dollars and therefore should be converted to reflect the proper value in Canadian dollars. For example, KFG's cash position of $1.4 million USD is actually worth $1.85 million Canadian dollars as of August 28th 2015. This is essential to do considering the company is listed on a Canadian exchange.**
Producing Wells - 25 (22 in 2014)
Barrels of oil per day average - 96.02 bopd (71.79bopd in 2014) - 25% increase
Average sell price - $46.41 ($101.75 in 2014) - Down by $55.34 or 54%
*Operating cost per barrel average is $18.85 before G&A costs*
*KFG sells it's oil at LLS(Louisiana Light Sweet) pricing which is similar to Brent*
Cash: $1,401,025 - (2014 $1,205,750)
Accounts Receivable: $482,880
Prepaid Expenses: $13,274
Reclamation bond: $20,000
Property and Equipment: $901,766
Total Assets: $2,818,945 - (2014 $3,017,302)
Accounts Payable: 527,848
Deposits : $3,988
Decommissioning Liability: $233,754
Total Liabilities: $765,590 - (2014 $879,582)
Assets decreased year over year, but so did Liabilities.
Oil and Gas - $2,278,425 - (2014 $2,240,754)
Management Fee's - 466,674 - (2014 $419,014)
Total Sales - $2,745,099 - (2014 $2,659,768)
Total - -$84,365 - (2014 $67,467)
Revenue year over year slightly higher due to production increase by a substantial amount. However, selling oil at $46 average in 2015 compared to $101 average in 2015 made a big difference.
Expenses( 2015 - 2014)
Automotive: $96,914 - 71,902 - Increased by $25,012
Bad Debt - 0 - $2,372 - Decreased by $2,372
Depletion - $807,733 - $408,559 - Increased by $399,174 (Write down)
Dry hole & Abandonment - $118,889 - $168,065 - Decreased by $49,176
Exchange Loss - $772 - $4,802 - Decreased by $4,030
Insurance - $114,937 - $106,896 - Increased by $8,041
Lease Operations - $615,761 - $758,738 Decreased by $142,977
Office & Misc - $296,145 - $275,720 Increased by $20,425
Rent - $19,602 - $18,633 Increased by $969
Salaries & Benefits - $758,711 - $776,614 Decreased by $17,903
If you exclude the write down, remaining expenses went down $162,551 year over year. Unfortunately, every petroleum company must write down assets and take it as an expense/loss.
Management Discussion Highlights
Summary of Quarterly Results
The main difference in the last two quarters ended January 31, 2015 and April 30, 2015 were slumping oil prices in the January 31, 2015 quarter and increased depletion and amortization changes because of reserve depletions resulting from increased production, directly affecting earnings.
Liquidity and Capital Resources
The Company’s main sources of liquidity are internally-generated cash flow from its oil and gas operations. Because KFG’s internally-generated cash flow is presently sufficient to fund its overall operating expenses, the Company will not require additional funding from equity capital markets in order to execute on its business strategy for at least the next twelve months. A decline in the prices of natural gas and oil could materially and adversely impact on KFG’s ability to secure partners in drilling projects, with the result that the Company may be forced to scale back its operational activities.
KFG had cash at April 30, 2015 of $1,401,025. Oil production at Fayette is providing positive cash flow and will continue. Also the Company’s new oil revenues will provide a borrowing base in addition to the Fayette development. As of now, the Company plans to expand as cash flow permits. The Company is already experiencing new production from the Craig #5 well and all wells are back on line. During the period January 2015 – April 2015, the Company experienced bad weather and weak pricing. Two wells were drilled in February 2015, but not put on production until May 2015 because of the weather. Also the Craig #2 well and the MacNeil wells have not lined up with expectations.
The quarter ended April 30, 2015 experienced prices at multi-year lows and wells of production that couldn’t be put back on in a timely manner. All wells are producing now but prices have reduced to the low $40 range from $60 in May, June and July 2015.
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 2016 internally.
**My Second Note: The directors Stephen Guido and Robert Kadane might not have large share positions, but they do own interests in several current and future wells. They were paid for this over 2015 and therefore it is in their best interest to make sure that every project is successful for KFG. They are paying for these wells at their own risk.**
Included in accounts receivable from co-owners is $18,204 (2014 - $nil) due from Geronimo Corporation, a company controlled by G. Stephen Guido, an officer and Director of the Company and $19,562 (2014 - $nil) from Robert Kadane, Director and officer of the Company.