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 June 30, 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 June 30, 2004, was 7,912,819.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements for Third Fiscal Quarter 2004
Period Ending June 30, 2004
Financial Statements for Third Fiscal Quarter 2004
Period Ending June 30, 2004
PIONEER OIL AND GAS
Balance Sheet
As of June 30, 2004
Assets
Current assets:
Cash $ 673,308
Accounts receivable 493,456
Resale leases, at lower of cost or market 935,446
-----------
Total current assets 2,102,210
Property and equipment - net (successful efforts method) 381,810
Other assets 2,000
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$ 2,486,020
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Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 1,182,488
Accrued expenses 30,490
Note payable -
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Total current liabilities 1,212,978
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Commitments and contingencies -
Stockholders' equity (deficit):
Common stock, par value $.001 per share, authorized
50,000,000 shares: 7,912,819 shares outstanding 7,912
Additional paid-in capital 2,473,396
Treasury Stock -
Stock subscription receivable (218,187)
Accumulated deficit (990,079)
-----------
Total stockholder's equity (deficit) 1,273,042
-----------
$ 2,486,020
PIONEER OIL AND GAS
Statement of Operations
Third Fiscal Quarter Ending June 30,
(Unaudited)
2004 2003
---- ----
Revenue:
Oil and gas sales $ 248,117 $ 237,350
Royalty Revenue 195,136 140,021
Operational reimbursements 1,500 3,106
Project and lease sales income 18,750 504,348
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463,503 884,825
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Costs and expenses:
Cost of operations 137,727 142,451
General and administrative expenses 73,204 75,603
Exploration costs 66,248 111,172
Lease rentals 14,498 15,950
Depreciation, depletion and amortization 32,433 21,831
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324,110 367,007
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Income (loss) from operations 139,393 517,818
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Other income (expense):
Loss on assets sold or abandoned (1,227) (308,261
Interest expense - (6,092)
Other (expense) income 488 51
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Income (loss) before provision
for income taxes 138,654 203,516
Provision for income taxes - -
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Net income (loss) $ 138,654 $ 203,516
----------- -----------
Earnings per share - basic and diluted $ .02 $ .03
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Weighted average common shares - basic and diluted 7,913,000 7,962,000
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PIONEER OIL AND GAS
Statement of Operations
Nine Months Ended June 30, 2004 and 2003
(unaudited)
2004 2003
---- ----
Revenue:
Oil and gas sales $ 657,647 $ 692,790
Royalty Revenue 533,397 253,363
Operational reimbursements 4,500 6,606
Project and lease sales income 37,500 538,185
----------- -----------
1,233,044 1,490,944
Costs and expenses:
Cost of operations 459,973 398,975
General and administrative expenses 254,115 233,706
Exploration costs 157,527 205,138
Lease rentals 48,458 54,514
Depreciation, depletion and amortization 87,299 65,561
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1,007,372 957,894
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Income from operations 225,672 533,050
Other income (expense):
Gain (loss) on assets sold or abandoned 810 (355,459)
Interest expense - (23,476)
Other income 19,957 8,269
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Income before provision
for income taxes 246,439 162,384
Provision for income taxes - -
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Net income $ 246,439 $ 162,384
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Earnings per share - basic and diluted $ .03 $ .02
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Weighted average common shares - basic and diluted 7,938,000 7,962,000
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PIONEER OIL AND GAS
Statement of Cash Flows
For The Nine Months Ended June 30, 2004 and 2003
(Unaudited)
2004 2003
---- ----
Cash flows from operating activities:
Net income $ 246,439 $ 162,384
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss (Gain) on assets sold or abandoned - 355,459
Depreciation, depletion and amortization 84,500 65,561
Employee benefit plan expense 20,698 20,698
Interest income (6,958) (7,746)
(Increase) decrease in:
Accounts receivable (343,663) (41,278)
Resale leases (715,769) 271,459
Other assets 230 -
Increase (decrease) in:
Accounts payable 1,060,395 (88,325)
Accrued expenses 5,283 4,476
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Net cash provided by
operating activities 351,155 742,688
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Cash flows from investing activities:
Acquisition of property and equipment (27,429) (4,504)
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Net cash used in investing activities (27,429) (4,504)
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Cash flow from financing activities:
Increase/Decrease in Credit Line - (654,158)
Acquisition of Treasury Stock (21,945) -
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Net cash used in financing activities (21,945) (654,158)
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Net increase in cash 301,781 84,026
Cash, beginning of period $ 371,527 $ 90,458
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Cash, end of period $ 673,308 $ 174,484
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PIONEER OIL AND GAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Third Fiscal Quarter Ending June 30, 2004
(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 and nine-month periods ending
June 30, 2004 are not necessarily indicative of the results that may be expected
for the year ending September 30, 2004. For further information, refer to the
financial statements and footnotes thereto included in the Company's Form 10-KSB
for the year ended September 30, 2003.
(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, 2004 and the results of operations and cash flows for
the three-month and nine-month periods ended June 30, 2004 and 2003. The results
of operations for the three-month and nine-month periods ended June 30, 2004 are
not necessarily indicative of the result to be expected for the entire year.
(2) Loss per common share is based on the weighted average number of shares
outstanding during the period.
(3) During the nine months ended June 30, 2004, the company recorded interest
income (on the stock subscription receivable) of $6,958 reduced the stock
subscription receivable by $13,740 and recorded an employee benefit plan
contribution of $20,698.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Period Ending June, 2004)
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 decreased from $884,825 in fiscal
2003 to $463,503 in fiscal 2004. For the nine-month period revenues decreased
from $1,490,944 to $1,233,044. The decrease in revenue for the three-month and
nine-month periods was entirely due to lower project and lease sales income.
Project and lease sale income decreased from $504,348 to $18,750 for the three
month period and from $538,185 to $37,500 for the ninth month period.
Total oil and gas sales (including royalty revenue) increased 18 percent from
$377,371 to $443,253 in the third quarter and 26 percent from $946,153 to
$1,191,044 for the nine-month period. These increases were due primarily to
increased gas production and higher product prices. Average oil prices for the
quarter increased from $25.14 bbl to $34.19 bbl while gas prices increased from
$4.27 MCF to $5.02 MCF. For the nine-month period, average oil prices increased
from $25.47 bbl to $30.58 bbl while gas prices increased from $3.46 to $4.73.
Gas production for the nine-month period increased by 11 percent primarily due
to increased production on our Hunter Mesa properties. Oil production decreased
14 percent for the nine-month period due to down time on our operated properties
and natural production declines. For the three-month period oil production
decreased four percent for similar reasons while gas production decreased 3
percent due to decreased production for one month (correcting a prior
overpayment) in the Hunter Mesa properties.
Project and lease sales income for the nine-month period decreased from $538,185
in 2003 to $37,500 in 2004. This was primarily due to the sale of about
two-thirds of our Uinta Basin Overpressured Gas Prospect in 2003. The company is
currently marketing the remainder of the prospect.
Costs of operations decreased from $142,451 to $137,727 for the quarter and
increased from $398,975 to $459,973 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 decreased from $75,603 to $73,204 for the
quarter and increased from $233,706 to $254,115 for the nine-month period.
The Company's net income for the third quarter (fiscal 2004) was $138,654
compared to net income of $203,516 for the third fiscal quarter 2003. For the
nine-month period (fiscal 2004) the Company posted net income of $246,439
compared to a net income of $162,384 for fiscal 2003.
Liquidity and Capital Resources
During the nine-months of fiscal 2003 cash provided by operating activities was
$351,155 while investing activities required $27,429. Net cash used in financing
activities was $21,945.
Cash provided by operating activities for the nine-months of fiscal 2003 was
$742,688. Cash provided by operating activities for the same period for fiscal
2004 was $351,155.
The company substantially increased its resale leases by $715,769 to $935,446
during the nine-month period. This was due to purchasing trend acreage on nine
prospects in the central Utah overthrust near Wolverine Gas and Oil's recent
major oil discovery. IHS Energy information services reported that Wolverine
completed a well pumping 960 barrels of oil per day about three miles southeast
of Sigurd in south-central Utah. This well was followed up by another productive
well currently being completed.
IHS Energy stated that these discoveries "promise to open a new oil-producing
province in the Rockies."
Pioneer's acreage position in the central Utah overthrust area consists of
approximately 24,000 gross and 12,000 net acres.
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 Board of Directors on July 30, 2004 added another board member Lynn Woodbury
to the Company's Board of Directors to comply with the Sarbanes-Oxley Act of
2002. Ms. Woodbury is a CPA and currently works with another oil and gas company
as their accountant. She will serve as the Company's independent audit committee
and financial expert for the audit committee.
Prior to the filing of this 10Q, the Company sold to industry partners an
interest in the Emigrant Gap Prospect in Natrona County, Wyoming and the Yankee
Mine Prospect, in White Pine County, Nevada. The Company has an 18.75% carried
working interest in both prospects and intends to drill the Initial Test Well on
both prospects prior to the end of the year subject to rig availability.
Item 6 - Exhibits and Reports on Form 8-K
(a) There are no exhibits with this report.
(b) The registrant did not file any reports on Form 8-K during the
fiscal quarter ended June 30, 2004.
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 5, 2004 /s/ Don J. Colton
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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 5, 2004
/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 5, 2004