KFG Resources Ltd Q1 2015 Results(Ending July 31st 2015)
Overall it was a pretty good quarter for KFG despite the circumstances. Oil prices down 50% year over year, historic flooding that caused some wells to shut off for 45-60 of the 90 days(See end of June news release). As well, expenses increased because of new staff and new equipment needed for damaged wells, plus a few other things.
- Cash increased almost $100k
- Liabilities went down $75K
- Company made a profit even with half of the revenue from last year
- New leases in Texas signed with wells to drill before year end
- More Mississippi wells to drill
Price: $0.08
Common Shares: 50,584,144
Options/Warrants: 0
Insider Holdings: 16%
Financials
ASSETS
Cash: $1,499,459 (last quarter was $1,401,025)
Accounts Receivable: $291,245
Prepaid Expenses: $12,856
Reclamation Bond: $20,000
Property & Equipment: $932,204
Total Assets: $2,755,764
LIABILITIES
Accounts payable: $453,535
Decommissioning Liability: $243,311
Total Liabilities: $696,846 (last quarter was $765,590)
Sales
Revenue: $506,423( last year this time was $904,409)
Production: 75bopd (same as last year due to shut wells because of flooding)
Productive wells: 23 compared to 21 in 2014
Net Income: $14,563
MD&A Highlights
The Company drilled two wells in February 2015 but they were not on production until late May and June 2015. The Company has sufficient cash reserves to finance its activities for the remainder of its fiscal year. Two new wells being completed in late September 2015 should add cash flow and help lower the overall cost of production. The Company plans to participate in the drilling of two new shallow wells in north central Texas before year end, marking KFG’s entry into Texas.
Revenue from the sale of oil and gas was $395,052 for three months ended July 31, 2015, compared to $788,143 for the three months ended July 31, 2014. The decrease in revenue is a result of a price collapse in oil from $102.40/bbl to $55.33/bbl.
Management fee revenue for the three months ended July 31, 2015 was $111,371 as compared to $116,266 for the three months ended July 31, 2014. The results are comparable between periods.
Lease operating expenses were $115,515 for the three months ended July 31, 2015 compared to $79,144 for the three months ended July 31, 2014. The increase in lease operating expenses is a result of putting two wells back on production that have been shut in because of the wet weather.
General and administrative expenses for three months ended July 31, 2015 were $278,985 compared to $267,460 for the three months ended July 31, 2014. The main increase in costs is a result of hiring new staff.
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.
KFG had cash at July 31, 2015 of $ 1,499,459. Although oil prices have collapsed, the Company, through the first fiscal quarter ended July 31, 2015, continues to generate positive cash flow. Two recent wells should help continue the trend. The Company will continue to manage its cash resources and will complete its current drilling program. In addition, the Company is increasing its inventory of projects seeking longer term leases.
Outlook
The Company’s cash position going forward will be able to finance all projects internally for the remainder of its fiscal year ending April 30, 2016. Two new wells should help the Company maintain a positive cash position. At this writing, two additional wells are planned in Mississippi this calendar year and one developmental well, weather permitting in Mississippi, as well as shallow wells in north Texas.
