Remember when I called WPP 5 years ago and it ran from 6c to 30c? Well this company is much better because it's got similar production, less shares, profitable and growing even in this environment. Information from their last financial report below.
Symbol: KFG Price: $0.08 Common Shares: 50,581,144 Insider Holdings: 16%
Financials ending October 31st 2014: Assets Cash: $ 1,836,298 Receivables: $403,296 Prepaid Expenses: $32,380 Reclamation Bond: $20,000 Property & Equipment: $1,222,247 Total Assets: $3,514,221 Liabilities Accounts Payable: $726,247 Deposits from Co-Owners: $38,373 Total Liabilities: $764,620
Management Discussion and Analysis Highlights The Company is a small independent energy company engaged in the development of onshore oil and gas reserves with activities concentrated in Concordia and Catahoula Parishes, Louisiana, Adams, Jefferson, and Wilkinson Counties, Mississippi and Comanche County, Kansas.
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. In addition, the Barnum #2 well is on production as of mid September 2014. The Craig #4 well was recently completed as a dryhole. With the Company’s current cash position and a quick ratio of 2.5, theCompany is in a good position to weather the current collapse in oil prices from about $84 in October 2014 to around $55 - $60/bbl at this writing and will still show positive cashflow. The Company’s operating cost per bbl is currently $18.85/bbl.
The Company reported net income of $611,881 for the six months ended October 31, 2014 compared to net income of $238,365 for the six months ended October 31, 2013, with the increase in net income a result less operating expenses plus better prices for oil and new oil from the Craig and McNeil bases due to increased working interest in the wells as well as total overhead charges remaining virtually unchanged. The Company reported net income of $151,781 for the three months ended October 31, 2014 compared to net income of $124,840 for the three months ended October 31, 2013, with the increase in net income a result less operating expenses plus new oil from the Craig and McNeil bases due to increased working interest in the wells.
During the quarter ended October 31, 2014, the Barnum #2 well was completed producing in excess of 100 BOPD. The Company has a 9% working interest in that well jumping to 16% at payout. The Company plans to offset that well in February 2015 as well as drill two new prospects. Gross income from oil sales increased 15% in spite of declining prices. 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. The Company’s outlook for the next six months is positive. With a current ratio of 2.97, KFG is well positioned to proper during this period of much lower oil prices. At this writing, no projects will be put off or delayed. The Company anticipates its 2015 drilling program starting in February 2015. Share Capital
The total number of shares outstanding as at October 31, 2014 and December 22, 2014, is 50,584,144. As of October 31, 2014 and December 22, 2014, there were no stock options or warrants outstanding.
KFG Q3 Results Ending January 31st 2015 Note: All numbers are in US Dollars which means there should be a 20% conversion to accommodate the TSXV listed security.
Price: $0.075 Common Shares: 50,584,144 Insider Holdings: 17% or just over 8.5 million shares as per SEDI Assets Cash: $2,133,800 (Q2 Cash: $1,836,298) (Q1 Cash: $1,133,429) – almost 100% increase from Q1 to Q3 Accounts Receivable: $238,843 Prepaid Expenses: $39,428 Reclamation bond: $20,000 Property and Equipment: $1,250,967 Total Assets: $3,693,038
Liabilities Accounts Payable: $464,480 Deposits from co-owners: $598,351 Total Liabilities: $1,062,831
Revenue After 9 Months Oil and Gas: $1,938,528 Management Fee’s: $330,010 Net Income: $492,487 EPS: $0.01
My Note: Even though revenue went down due to the 50% decline in oil prices, KFG was still able to add cash to the company treasury and continue drilling despite 3 dry wells back to back. Without the two events, earnings would have been much higher for the quarter. As well, with every new producing well KFG puts online, management fee revenue will also increase on a monthly basis.
MD&A Highlights For the nine months ended January 31, 2015, the Company had cash flow from oil and gas production of $1,469,120, compared to $1,116,992 for the nine months ended January 31, 2014. Oil production increased from 77.51 BOPD to 105.06 BOPD, and gas production decreased 1.19 MCF per day. The average price of gas increased $0.38 per MCF and the average price of crude oil decreased $15.05 per bbl when comparing the nine months ended January 31, 2015 and January 31, 2014. 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. In addition, the Barnum #2 well is on production as of mid September 2014. The Craig #4 well was recently completed as a dryhole. With the Company’s current cash position, the Company is in a good position to weather the current collapse in oil prices from about $84 in October 2014 to around $55 - $60/bbl at this writing and will still show positive cashflow. The Company’s operating cost per bbl is currently $18.85/bbl. Currently, the Company has two wells awaiting completion drilled in February 2015 – both in Adams county. The Barnum #3 well encountered the main field zone in the Parker sand at 6,400’. The Company has a 9% working interest in the well converting to a 20.55% working interest at payout. The Craig #5 well encountered the main pay zone at 1,300’ and an additional oil zone at 10,214’. The Company has a 21.5% working interest in this well. With $2,133,800 in cash, the Company is well positioned to weather the current price collapse in crude oil. KFG has a current ratio of 2.27 to 1. During the quarter ended January 31, 2015, the Company saw a major price collapse in the price of crude oil resulting in revenues of $446,746 compared to the prior quarter’s revenue in excess of $800,000. Greatly lower costs during the period allowed the Company to limit its losses compared to the corresponding quarter ending January 31, 2014. With its cash position and lack of debt, the Company is well positioned and is not planning to cut back its exploration and development.
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. 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 January 31, 2015 of $2,133,800. Oil production at Fayette is providing positive cash flow and will continue to do just that. As of now, the Company plans to expand as cash flow permits. The Company is experiencing new cash flow from the Craig #1 and #2 wells, and the MacNeil #2 and #3 wells as well as having the Dale lease back on line. Also in the quarter, the Craig #3 well was completed; producing 50 BOPD and the Barnum #2 well was completed and is now producing to 80 BOPD. In addition, the Craig #1 and #2 and the MacNeil #2 and #3 have paid out causing the Company’s revenue from those wells to more than double. Even at current prices, the Company is producing positive cash flow.
In January and February 2015, the Company drilled 4 wells. Two dry holes in Franklin County, MS where the Company’s exposure was limited to 10% in each dry hole and two development wells – the Craig #5 and the Barnum #3 that are still awaiting completion due to bad weather. In the Craig #5 well, the Company has a 21.5 % working interest and it is expected to be a large source of new revenue once completed and on production. There are no plans at present to curtail the Company’s programs.
The Company is not contemplating any other transactions which have not already been disclosed. The Company continues to look at other property acquisitions and to seek joint venture partners on its properties on a regular basis.
Share Capital The total number of shares outstanding as at January 31, 2015 and March 27, 2015, is 50,584,144. As of January 31, 2015 and March 27, 2015, there were no stock options or warrants outstanding.
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. The Company’s outlook for the next twelve months is positive. With a current ratio of 2.27, KFG is well positioned to prosper during this period of much lower oil prices. In January and February 2015, KFG drilled 4 wells – two shallow dry holes in Franklin, Co. MS and two successful development wells in Adams Co. MS – the Barnum #3 and the Craig #5. Both wells are waiting on completion. Five new projects are in various stages of completion and are expected to be ready to drill by early summer. There is also development still to be done on the Barnum and Craig leases.
Last quarter KFG was producing at 105bopd. Including this well, the company will be closer to 130bopd since their declines are almost non-existent. Barnum 3 should add some good production, Craig 3 pays out in June, and the next several wells should give KFG the potential to double it's last quarter production numbers.
New article on KFG Resources from PennyStockExperts:
Attractive, Smart, and Relatively Wealthy Oil Operator Seeks Your Attention Let’s face it, mainstream financial media has trained investors to think shale plays like Bakken, Eagle Ford, Marcellus et al. are the only game in town. Now I’m no T. Boone Pickens, but I know they’re ignoring more than a few proven oil fields. Disregarding conventional projects in favor of shale could continue to be a costly mistake for investors and operators alike moving forward. Like a moth to a flame… After harnessing the power of horizontal drilling, the oil industry was drawn toward hydraulic fracturing and shale like a moth to a flame. As a whole, it abandoned conventional shallow prospects, historically its bread and butter, and flew directly toward the orange yellowish glow of this newer (dare I say sexier) more controversial technique. Easy money leads to oversupply. Thanks to an era of easy money and $100 per barrel pricing, banks, brokers, and their clients lent to just about anyone willing to borrow. Therefore, oil operators took the money. And I guess they had to, those fancy horizontal wells don’t come cheap, each one can cost over $10 million. As you can imagine… the bills start adding up quickly. Thousands of wells would never have been drilled if cash from operating activities were the only funds available. Levering up ruled the day! Even sub-par outfits were able to borrow, borrow, and borrow some more, betting they could pay back lenders after oil prices continued rising. Long story short, drilling successes contributed to an oversupplied market (we’ll save the other factoids for another day), and lots of bettors got it wrong. Nearly all shale projects need at least $60 WTI to break even, some would argue much higher, so many oil companies are now facing a life and death situation. If we break the industry down into three groups, here’s my interpretation: 1) Those who got burned flying too close to the orange yellowish glow [bankrupt] 2) Those who levered up and are forced to run faster to stay ahead of debt collectors [borderline delinquent] 3) Those who operated during the boom expecting a bust someday [healthy, strong, and control destiny] Which of the three would you be attracted to? Simplicity is back in fashion. With enough time, what’s old always seems to become new again. Conservative, conventional operators like KFG Resources (CVE: KFG) (OTCMKTS: KFGRF) and its CEO Robert A. Kadane now look like the smartest guys in the room. Bob, as he prefers to be called, has first-hand experience spanning forty years. As a youngster he watched, learned, and then helped his dad manage a small fleet of drilling rigs back when oil was 40 cents a barrel. Maybe you’ve heard or know about guys who run around in Armani suits calling themselves “oil man”? You’ll see them more frequently during the boom times … well that’s not Bob! Granted, marketing and promotion aren’t his strong points, just look at KFG’s website. Rough around the edges, maybe, but Bob understands the oil business and knows how to run a tight ship, and that’s most important for KFG’s long-term success. Looking for proof of concept? Prime Energy (NASDAQ: PNRG) is a $135 million dollar exchange listed company Bob built and ultimately sold before starting his next venture… KFG Resources. KFG controls its own destiny… With help from his team, including G. Stephen Guido of Shamrock Drilling, Bob and KFG Resources have time to think wisely and make strategic moves aimed at creating shareholder value. Unlike many of its peers, whom are weighed down by debt or already bankrupt, KFG Resources controls its own destiny. While the industry was chasing the latest and greatest shale play(s), bidding up prices, KFG Resources stayed true to what it knows best, low-cost high return conventional opportunities, primarily in Mississippi and Louisiana. Hold it… “Low cost high return”? Isn’t that what everyone is looking for, the kind of deal you only hear about from pitchmen, too good to be true type stuff. Well, yes and no, please stay with me. Hitting it where they ain’t! To use a baseball analogy: drilling one of those fancy $10 million dollar horizontal wells into the Eagle Ford or Bakken is equivalent to swinging for the fence. You either hit a homerun or strikeout, there isn’t much room in between, success or failure. Hitting homeruns are great! But the oil business can be less forgiving than MLB when it comes to strikeouts. Therefore, every winning baseball team (or portfolio of oil assets) needs players who get on base 30-40% of the time, and keep dry holes (strikeouts) to a minimum. Occasionally, KFG Resources will hit a homerun, like it did recently with Craig #5, this well paid back its initial investment in just 8 weeks! But singles and doubles are also in its game plan. Inevitably, dry holes will and have occurred, but with drilling costs under $350,000 (less than 4% of a horizontal), KFG Resources should always be able to take another swing at its best geological targets. I can assure you, Wall Street and Bay Street are overlooking KFG Resources because of its small stature, but to me that’s part of its appeal. In my experience, independent investors improve their odds of success and make more money by hitting it where the professional analysts aren’t— then selling to them at a premium later. Bottom Line: With proved crude oil reserves of 247 million barrels, as of Dec. 2010, Mississippi exhibits strong potential for the development of oil and gas reserves. KFG Resources manages risk by working with loyal partners who co-invest; it maintains a 10%-59% interest in 26 producing wells. Additionally, it earns monthly revenue per well as operator and servicer. Finally, the metrics work, Craig #5 cost approximately $300,000 to complete, so for $65k (KFG’s 21% stake) it added 20 barrels of oil per day>>> roughly $438,000 in annual revenue at $60 per barrel>>> for KFG’s $65,000 investment! Obviously, that discovery wouldn’t move the needle for Exxon Mobil, but it’s a homerun for KFG, and with any luck it expects to hit a few more like Craig #5 this summer. *Disclosure: author is establishing a long position in KFG Resources
KFG Resources restarts production at all wells
2015-06-29 11:33 MT - News Release
Mr. Robert Kadane reports
KFG OPERATIONS UPDATE
KFG Resources Ltd.'s subsidiary KFG Petroleum Corp.'s Craig No. 5 well, which was put on production in May, 2015, in Adams county, Mississippi, continues to produce 100 barrels of oil per day water free. The company has a 21.5-per-cent (16.025-per-cent net) interest in the well. The Barnum No. 3 well is still undergoing production testing, although results to date are disappointing. KFG's interest in the Barnum well is 9 per cent (6.75 per cent net).
The price of crude oil in May was $60.50, bringing all production back into positive territory. All production is finally back on-line after the wettest five months in memory. A few wells were down periodically in KFG's fiscal third quarter ending Jan. 31, 2015, and in the company's last fiscal quarter ending April 30, 2015. The last well that was down is back on production this week. Weather conditions made it extremely hard to get wells back on-line in a timely fashion.
The company's drilling program should be under way in about 30 days. It is anticipated, at present, that there will be five exploratory wells, and one or two development wells in the program.
KFG Financial Comparison Chart (Audited Annual Financials From 2008 to 2015)
I made this financial comparison show everyone where KFG is after years of gains and setbacks. It's been a long journey, but after much trial and error, this company has finally found the best way to grow itself. Despite low oil prices and weather trying to stop the company, this just won't happen. KFG is now a self sufficient oil junior and is more than capable of doubling or tripling its production on a yearly basis. This will inevitably increase revenue, cash position and net income which could lead to a dividend, share buyback or even takeover of the company. Please see below for a break down of every Audited Year End financial report.
KFG Year End Results in 2008 - Cash: $2.66M, Total Assets: $2.96M, Total Debt: $553K - Revenue: $798K, Net Loss For The Year: -$64K - Shares Outstanding: 30,874,646 - This was before the global crisis. KFG was trading around $0.15c and still raising money. Total was 25 million shares which is half of the entire O/S right now and a major cash injection. However this was done at a lower price.
KFG Year End Results in 2009 - Cash:$1.62M, Total Assets: $2.33M, Total Debt: $156K - Revenue: $645K, Net Loss For The Year: $456K - Shares Outstanding: 42,147,311 - Additional Funds Raised
KFG Year End Results in 2010 - Cash: $304K, Total Assets: $1.84M, Total Debt: $640K - Revenue: $997K, Net Loss For The Year: -$1.4M - Shares Outstanding: 47,786,580 - Additional Funds Raised
KFG Year End Results in 2011 - Cash: $1.03M, Total Assets: $2.94M, Total Debt: $834K - Revenue: $2.9M, Net Income For The Year: $832K - Shares Outstanding: 50,480,644 - This was a milestone year because KFG hit a string of wells(Fayette) that helped them recover from the financial crisis. Some assets were also sold and funds raised as well. The stock went back to the teen price range this year. - Additional Funds Raised.
KFG Year End Results in 2012 - Cash: $637K, Total Assets: $2.43M, Total Debt: $439K - Revenue: $3.5M, Net Loss For The Year: $144K - Shares Outstanding: 50,559,191 - Despite the record profit, KFG took a major risk this year and unfortunately lost. Drilling a 100% interest Tuscaloosa well which cost the company over $1 million USD and it did not work out. This is why KFG’s strategy changed from solo wells to JV wells in multiple areas.
KFG Year End Results in 2013 - Cash: 861K, Total Assets: $2.5M, Total Debt: $430K - Revenue: $3.05M, Net Income For The Year: $76K - Shares Outstanding: 50,584,144(Some shares cancelled and this is the current share structure. - This was the year where KFG started to diversify into multiple wells rather than just rely on the 9 Fayette and do a couple 100% interest wells.
KFG Year end Results in 2014 - Cash: $1.21M, Total Assets: $3.02M, Total Debt: $880K - Revenue: $2.7M, Net Income For The Year: $67K - Shares Outstanding: 50,584,144 - The reason why revenue went down this quarter was due to the fact that the 9 Fayette wells paid out from 75% to 59%, along with additional costs from doing other wells. However, new production was put in place to replace the lost paid out production from Fayette. - Debt increase is based strictly on deposits from partners, not bank or payables.
KFG Results after 9 months in 2015 - Cash: $2.134M, Total Assets: $3.7M, Tot Debt: $1.07M - Revenue: $2.27M, Net Income After 9 Months: $493K - Shares Outstanding: 50,584,144 - If the price of oil didn’t drop 60% and weather didn’t hamper KFG’s operations (as stated in their last news release), net income would be close to $1 million USD right now. Regardless, this has not stopped KFG’s growth plans. Five to seven wells have been announced for the summer drill campaign and the company can only go forward from here.
There's only 50,584,144 common shares with no options or warrants. Haney, Kevin Insider's Relationship to Issuer as Filed with Regulator: 3 - 10% Security Holder of Issuer TransactionDate Transaction Nature # or value acquiredor disposed of Price AccountBalance Security Type: Common Shares (Direct Ownership) Jul 17/15 10 - Acquisition in the public market 16,000 $0.095 6,000,000 Jul 17/15 10 - Acquisition in the public market 20,000 $0.090 5,984,000 Jul 17/15 10 - Acquisition in the public market 2,000 $0.085 5,964,000 Jul 14/15 10 - Acquisition in the public market 2,500 $0.090 5,962,000 Jul 6/15 10 - Acquisition in the public market 3,000 $0.100 5,959,500 Jun 29/15 10 - Acquisition in the public market 10,000 $0.090 5,929,500 Jul 6/15 10 - Acquisition in the public market 10,000 $0.085 5,956,500 Jul 6/15 10 - Acquisition in the public market 17,000 $0.080 5,946,500 May 27/15 10 - Disposition in the public market -71,500 $0.100 5,919,500 Apr 23/15 10 - Acquisition in the public market 1,500 $0.110 5,991,000 Apr 23/15 10 - Acquisition in the public market 1,000 $0.105 5,989,500 Apr 22/15 10 - Acquisition in the public market 500 $0.090 5,988,500 Apr 22/15 10 - Acquisition in the public market 2,000 $0.085 5,988,000 Apr 2/15 10 - Acquisition in the public market 1,000 $0.100 5,986,000 Apr 2/15 10 - Acquisition in the public market 5,000 $0.090 5,985,000 Mar 26/15 10 - Acquisition in the public market 5,000 $0.080 5,980,000 Mar 24/15 10 - Acquisition in the public market 2,500 $0.080 5,975,000 Mar 20/15 10 - Acquisition in the public market 5,000 $0.085 5,972,500 Mar 13/15 10 - Acquisition in the public market 7,500 $0.080 5,967,500 Mar 11/15 10 - Acquisition in the public market 5,000 $0.085 5,960,000 Mar 5/15 10 - Acquisition in the public market 2,000 $0.080 5,955,000 Mar 5/15 10 - Acquisition in the public market 13,000 $0.090 5,953,000 Mar 4/15 10 - Acquisition in the public market 10,000 $0.090 5,940,000 Feb 27/15 10 - Acquisition in the public market 5,000 $0.080 5,930,000 Feb 12/15 10 - Acquisition in the public market 3,000 $0.105 5,925,000 Feb 12/15 10 - Acquisition in the public market 2,000 $0.100 5,922,000 Feb 10/15 10 - Acquisition in the public market 5,000 $0.105 5,920,000 Feb 9/15 10 - Acquisition in the public market 5,000 $0.105 5,915,000 Feb 5/15 10 - Acquisition in the public market 5,000 $0.105 5,910,000 Feb 2/15 10 - Acquisition in the public market 1,000 $0.125 5,905,000 Feb 2/15 10 - Acquisition in the public market 4,000 $0.120 5,904,000 Feb 2/15 10 - Acquisition in the public market 2,000 $0.125 5,900,000 Feb 1/15 10 - Acquisition in the public market 23,000 $0.120 5,883,000 Feb 2/15 10 - Acquisition in the public market 15,000 $0.110 5,898,000 Jan 30/15 10 - Acquisition in the public market 9,000 $0.095 5,860,000 Jan 30/15 11 - Acquisition carried out privately 1,000 $0.090 5,851,000 Jan 28/15 10 - Acquisition in the public market 5,000 $0.095 5,850,000 Jan 21/15 10 - Acquisition in the public market 5,000 $0.090 5,845,000 Jan 20/15 10 - Acquisition in the public market 10,000 $0.090 5,840,000
KFG Resources Ltd.'s drilling program is on hold because of high water above flood stage in the Mississippi River which affects large areas of land -- sometimes many miles away from the river. This circumstance is unprecedented in the last 75 years. The company's program will commence when conditions permit.
The company's production is stable and cash flow was positive during the first quarter of its fiscal year ending July 31, 2015. The company's Barnum No. 3 well in Adams county, Mississippi, has proved to be non-commercial and is producing 10 barrels of oil per day.
As of this date, the company has three new projects and one development well ready to drill. Two additional projects are being assembled. All projects are in Mississippi.
KFG Year End Results Ending April 30th 2015
Current Price: $0.08 Common Shares: 50,584,144 Options/Warrants: 0 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*
Assets decreased year over year, but so did Liabilities.
Sales 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.
Fourth Quarter 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.
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 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.**
From financials: 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.