U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2002.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 0-9435
|
Colorado |
84-0811034 |
1703 Edelweiss Drive
Cedar
Park, Texas
78613
(Address of Principal Executive Offices)
(Zip Code)
(512)
250-8692
(Issuer's Telephone Number, Including Area Code)
Securities registered
under Section 12(b) of the Exchange Act:
(None)
Securities registered under Section 12(g) of the Exchange Act:
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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
Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
The issuer's revenues for its most recent fiscal year were $2,402,300.
As of December 31, 2002, 7,580,175 shares of the Registrant's common stock par value $.01 per share, were outstanding. The aggregate market value of the voting stock held by non-affiliates of the Registrant at March 31, 2001, was $4,169,366.
Documents Incorporated by Reference: The Registrant hereby incorporates herein by reference the following documents.
SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-KSB
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act and Section 27A of the Securities
Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. All
statements, other than statements of historical facts, included in this Form
10-KSB that address activities, events or developments that FieldPoint
Petroleum Corp. and its subsidiaries (collectively, the "Company")
expects, projects, believes or anticipates will or may occur in the future,
including such matters as oil and gas reserves, future drilling and operations,
future production of oil and gas, future net cash flows, future capital
expenditures and other such matters, are forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
Such factors include, among others, the following: the volatility of oil and gas prices, the
Company's drilling and acquisition results, the Company's ability to replace
reserves, the availability of capital resources, the reliance upon estimates of
proved reserve, operating hazards and uninsured risks, competition, government
regulation, the ability of the Company to implement its business strategy and
other factors referenced in this Form 10-KSB.
General
FieldPoint Petroleum Corporation, a Colorado corporation (the "Company"), was formed on March 11, 1980, to acquire and enhance mature oil and natural gas field production in the mid-continent and the Rocky Mountain regions. Since 1980, the Company had engaged in oil and gas operations and, in 1986, divested all oil and gas assets and operations. From December 1986, until its reverse acquisition on December 31, 1997, The Company had not engaged in oil and gas operations.
Reverse
Acquisition - On December 22, 1997, The Company entered into an Agreement with
Bass Petroleum, Inc., a Texas corporation ("BPI"), pursuant to which,
on December 31, 1997, the Company acquired from the shareholders of BPI an
aggregate of 8,655,625 shares of capital stock of BPI, in exchange for the
issuance of 4,000,000 unregistered shares of the Company's common stock. The transaction was treated, for accounting
purposes, as an acquisition of FieldPoint Petroleum Corporation by Bass
Petroleum, Inc. On December 31,1997, the Company changed its name from Energy
Production Company to FieldPoint Petroleum Corporation.
Business Strategy
The
Company's business strategy is to continue to expand its reserve base and
increase production and cash flow through the acquisition of producing oil and
gas properties. Such acquisitions will
be based on an analysis of the properties' current cash flow and the Company's
ability to profit from the acquisition.
The Company's ideal acquisition will include not only oil and gas
production, but also leasehold and other working interest in exploration areas.
The
Company will also seek to identify promising areas for the exploration of oil
and gas through the use of outside consultants and the expertise of the
Company. This identification will
include collecting and analyzing geological and geophysical data for
exploration areas. Once promising
properties are identified, the Company will attempt to acquire the properties
either for drilling oil and natural gas wells, using independent contractors
for drilling operations, or for sale to third parties.
The
Company recognizes that the ability to implement its business strategies is
largely dependent on the ability to raise additional debt or equity capital to
fund future acquisition, exploration, drilling and development activities. The Company's capital resources are
discussed more thoroughly in Part II, Item 6, in Management's Discussion and
Analysis.
Operations
As
of December 31, 2002, the Company had varying ownership interest in 338 gross
productive wells (89.77 net) located in 3 states. The Company operates 59 of the 353 wells; the other wells are
operated by independent operators under contracts that are standard in the
industry. It is a primary objective of the Company to operate most of the oil
and gas properties in which it has an economic interest. The Company believes, with the
responsibility and authority as operator, it is in a better position to control
cost, safety, and timeliness of work as well as other critical factors
affecting the economics of a well.
Market for Oil and Gas
The
demand for oil and gas is dependent upon a number of factors, including the
availability of other domestic production, crude oil imports, the proximity and
size of oil and gas pipelines in general, other transportation facilities, the
marketing of competitive fuels, and general fluctuations in the supply and
demand for oil and gas. The Company
intends to sell all of its production to traditional industry purchasers, such
as pipeline and crude oil companies, who have facilities to transport the oil
and gas from the wellsite.
Competition
The
oil and gas industry is highly competitive in all aspects. The Company will be competing with major oil
companies, numerous independent oil and gas producers, individual proprietors,
and investment programs. Many of these
competitors possess financial and personnel resources substantially in excess
of those which are available to the Company and may, therefore, be able to pay
greater amounts for desirable leases and define, evaluate, bid for and purchase
a greater number of potential producing prospects that the Company's own
resources permit. The Company's ability
to generate resources will depend not only on its ability to develop existing
properties but also on its ability to identify and acquire proven and unproven
acreage and prospects for further exploration.
Environmental Matters and
Government Regulations
The
Company's operations are subject to numerous federal, state and local laws and
regulations controlling the discharge of materials into the environment or otherwise
relating to the protection of the environment.
Such matters have not had a material effect on operations of the Company
to date, but the Company cannot predict whether such matters will have any
material effect on its capital expenditures, earnings or competitive position
in the future.
The
production and sale of crude oil and natural gas are currently subject to
extensive regulations of both federal and state authorities. At the federal level, there are price
regulations, windfall profits tax, and income tax laws. At the state level, there are severance
taxes, proration of production, spacing of wells, prevention and clean-up of
pollution and permits to drill and produce oil and gas. Although compliance with their laws and
regulations has not had a material adverse effect on the Company's operations,
the Company cannot predict whether its future operations will be adversely
effected thereby.
Operational Hazards and
Insurance
The
Company's operations are subject to the usual hazards incident to the drilling
and production of oil and gas, such as blowouts, cratering, explosions,
uncontrollable flows of oil, gas or well fluids, fires, pollution, releases of
toxic gas and other environmental hazards and risks. These hazards can cause personal injury and loss of life, severe
damage to and destruction of property and equipment, pollution or environmental
damage and suspension of operations.
The
Company maintains insurance of various types to cover its operations. The Company's insurance does not cover every
potential risk associated with the drilling and production of oil and gas. In particular, coverage is not obtainable
for certain types of environmental hazards.
The occurrence of a significant adverse event, the risks of which are
not fully covered by insurance, could have a material adverse effect on the
Company's financial condition and results of operations. Moreover, no assurance can be given that the
Company will be able to maintain adequate insurance in the future at rates it
considers reasonable.
Administration
Office
Facilities- The office space for the Company's executive offices at 1703
Edelweiss Drive, Cedar Park, Texas 78613, is currently provided by the majority
shareholder at a cost of $1,500 per month as of December 31, 2002.
Employees-
As of March 31, 2003, the Company had 4 employees, the Company considers its
relationship with its employees satisfactory.
ITEM 2-PROPERTIES
Principal Oil and Gas
Interest
Chickasha Field, Grady
County Oklahoma is a waterflood project producing from the Medrano Sand. The Rush
Springs Medrano Unit is located approximately sixty five miles southwest of
Oklahoma City, Oklahoma. The Company has a 20.64% working interest in the unit
which consist of 21 producing oil and gas wells and 11 water injection wells.
Hutt Wilcox Field, McMullen
and Atascosa County Texas is an oil and gas field located approximately 60 miles south of San
Antonio, Texas producing from the Wilcox sand. The Company has a working
interest in 14 oil wells.
West Allen Field, Pontotoc
County Oklahoma is a producing oil and gas field located approximately 100 miles south
of Oklahoma City, Oklahoma. The Company has a working interest in 52 leases or
a total of 225 wells, the leases have multiple wellbores and the Company has plans
to participate in the future recompletion of behind pipe zones.
Giddings Field, Fayette
County Texas is
in the prolific Austin Chalk field located in various counties surrounding the
city of Giddings, Texas. In February 1998, the company acquired a 97% working
interest in the Shade lease. The lease currently has 3 producing oil and gas
wells with a daily production rate of approximately 120 Mcfe net to the
Company. Oil and Gas are produced from the Austin chalk formation; the Company
will evaluate whether additional reserves can be developed by use of horizontal
well technology.
Big Muddy Field, Converse
County Wyoming
is a producing oilfield located approximately thirty miles south of Casper,
Wyoming. FieldPoint Petroleum owns a
100% working interest in the Elkhorn and J.C. Kinney lease which consists of 3
oil wells producing out of the Wallcreek and Dakota formations at depths
ranging from approximately 3,200 feet to approximately 4,000 feet.
Serbin Field, Lee and
Bastrop Counties Texas is an oil and gas field located approximately 50 miles east of Austin
and 100 miles west of Houston. The
Company has a working interest in 72 producing oil and gas wells with a
production rate for 2002 of approximately 45 barrels of oil equivalent
("BOE") net to the Company.
Oil and gas are produced from the Taylor Sand at depths ranging from
approximately 5,300 feet to approximately 5,600 feet; it is a 46-gravity oil
sand.
Production
The
table below sets forth oil and gas production from the Company's net interest
in producing properties for each of its last two fiscal years.
|
Oil and Gas Production |
|||
|
|
|
|
|
Quantities |
2002 |
2001 |
||
|
Oil
(Bbls) |
90,825 |
84,046 |
|
|
Gas
(Mcf) |
108,990 |
114,123 |
|
|
|
|
|
|
Average
Sales Price |
|
|
||
|
Oil
($/Bbl) |
$22.62 |
$23.20 |
|
|
Gas
($/Mcf) |
$2.00 |
$3.76 |
|
|
|
|
|
|
Average
Production Cost ($/BOE) |
$12.02 |
$8.86 |
||
The
Company's oil and gas production is sold on the spot market and the Company
does not have any production that is subject to firm commitment contracts. During the year ended December 31, 2002,
purchases by each of three customers, Dorado Oil Company, Plains Petroleum, and
Pontotoc Production, Inc. represented more than 10% of the total Company
revenues. Neither of these three
customers, or any other customers of the Company, has a firm sales agreement
with the Company. The Company believes
that it would be able to locate alternate customers in the event of the loss of
one or all of these customers.
Productive Wells
The
table below sets forth certain information regarding the Company's ownership,
as of December 31, 2002, of productive wells in the areas indicated.
Productive Wells |
||||
|
|
|
|
|
|
Oil |
Gas |
||
State |
Gross1 |
Net2 |
Gross1 |
Net2 |
Oklahoma |
209 |
47.23 |
37 |
4.59 |
Texas |
82 |
31.15 |
7 |
3.8 |
Wyoming |
3 |
3 |
- |
- |
Total |
294 |
81.38 |
44 |
8.39 |
Drilling Activity
The
Company drilled no wells in 2001and 2002
Reserves
Please
refer to unaudited Note 12 in the accompanying audited financial statements for
a summary of the Company's reserves at December 31, 2002 and 2001.
Acreage
The
following tables set forth the gross and net acres of developed and undeveloped
oil and gas leases in which the Company had working interest and royalty
interest as of December 31, 2002. The
category of "Undeveloped
Acreage" in the table includes leasehold interest that already may have
been classified as containing proved undeveloped reserves.
|
Developed1 |
Undeveloped2 |
||
State |
Gross3 |
Net4 |
Gross3 |
Net4 |
Oklahoma |
8906 |
1175 |
200 |
19 |
Texas |
2120 |
547 |
1360 |
1000 |
Wyoming |
200 |
200 |
2000 |
2000 |
Total
|
11226 |
1922 |
1960 |
1419 |
ITEM 3-LEGAL PROCEEDINGS
None.
ITEM 4-SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5-MARKET FOR COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The
Company's Common Stock is traded in the over-the-counter market and listed on
the Bulletin Board under the symbol "FPPC." The following quotations,
where quotes were available, reflect inter-dealer prices, without retail
mark-up, markdown or commission and may not necessarily represent actual
transactions.
|
FISCAL 2001 |
CLOSING BID |
|
|
|
|
|
|
|
HIGH |
LOW |
|
First
Quarter |
2.2500 |
1.3400 |
|
Second
Quarter |
2.0900 |
1.6500 |
|
Third
Quarter |
2.2800 |
1.4300 |
|
Fourth
Quarter |
2.1000 |
1.1400 |
|
|
|
|
|
FISCAL 2002 |
|
|
|
|
HIGH |
LOW |
|
First
Quarter |
1.6500 |
.8000 |
|
Second
Quarter |
.9000 |
.4000 |
|
Third
Quarter |
.7500 |
.2500 |
|
Fourth
Quarter |
.7500 |
.1600 |
At
March 31, 2002, the approximate number of shareholders of record was
1,150. The Company has not paid any
dividends on its Common Stock and does not expect to do so in the foreseeable
future.
Recent Sales of Unregistered
Securities
During
the fiscal year ended December 31, 2002, the Company issued no securities
without registration under the Securities Act of 1933, as amended.
During
the year ended December 31, 2001 the Company issued 357,350 shares of Common
Stock upon the exercise of warrants associated with the W.B. McKee Securities
Unit offering.
As
to the issuance of securities identified above, the Company relied upon Section
4(2) of the Securities Act in claiming exemption from the registered
requirement of the Securities Act. All
the persons to whom the securities were issued had full information concerning
the business and affairs of the Company and acquired the shares for investment
purposes. Certificates representing the
securities issued bear a restrictive legend prohibiting transfer of the
securities except in compliance with applicable securities laws.
EQUITY
COMPENSATION PLAN INFORMATION
|
|
|
Number of securities remaining available for future issuances under
equity compensation plans (excluding securities reflected in column (a)) |
|
|
|
|
Equity
compensation plans approved by |
|
|
|
Equity
compensation plans not approved |
420,000 |
$1.36 |
420,000 |
Total |
420,000 |
$1.36 |
420,000 |
(1) Includes
nonqualified options granted to outside directors.
ITEM 6-MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The
following discussion should be read in conjunction with the Company's Financial
Statements, and respective notes thereto, included elsewhere herein. The information below should not be
construed to imply that the results discussed herein will necessarily continue
into the future or that any conclusion reached herein will necessarily be
indicative of actual operating results in the future. Such discussion represents only the best present assessment of
the management of FieldPoint Petroleum Corporation.
Overview
FieldPoint
Petroleum Corporation derives its revenues from its operating activities
including sales of oil and gas and operating oil and gas properties. The Company's capital for investment in
producing oil and gas properties has been provided by cash flow from operating
activities and from bank financing. The
Company categorizes its operating expenses into the categories of production
expenses and other expenses.
Comparison of Year Ended
December 31, 2002 to Year Ended December 31, 2001
Results of Operation
Revenues
decreased 4% or $97,844 to $2,402,300 for the year ended December 31, 2002,
from the comparable 2001 period. Oil
production volumes increased by 8% at the same time the average price per
barrel decreased 2% during 2002 to $22.62 from the comparable 2001 period
average price of $23.20 per barrel.
Also in 2002, the gas production volume decreased by 4% while the
average price per Mcf was $2.00, a decrease of 47% from the 2001 comparable
period. The increase in production volumes were primarily due to the existing
production and continued development of oil and gas wells in Oklahoma.
|
Year Ended December 31, |
|
|
2002 |
2001 |
Oil
Production |
90,825 |
84,046 |
Average
Sales Price Per Bbl ($/Bbl) |
$22.62 |
$23.20 |
|
|
|
Gas
Production |
108,990 |
114,123 |
Average
Sales Price Per Mcf ($/Mcf) |
$2.00 |
$3.76 |
Production
expenses increased 43% or $397,806 to $1,310,609 for the year ended December
31, 2002, from the comparable 2001 period. The increase was due to cost
associated with Oklahoma field production, with increases in workover expense
and remedial repairs incurred in 2002 as compared to 2001. Depletion and depreciation expense increased
6% or $33,580 to $514,658 for the year ended December 31, 2002 from the
comparable 2001 period. The increase in depletion and depreciation was due to
increases in oil and gas property cost as well as increased production volume. General and administrative overhead cost
increased 52% or $264,312 to $772,410 for the 2002 period verses the comparable
2001 period this was due primarily to an increase in consulting fees, some of
which related to evaluation of possible acquisition prospects.
Net
other expenses for the year ended December 31, 2002, was $18,344 compared to
net other expenses of $126,633 for 2001.
This decrease was primarily due to gain on sale of properties offset by
decreases in interest expense and losses on derivatives.
The
Company's net income decreased by $439,914 to a loss of $131,521 for the year
ended December 31, 2002, from the comparable 2001 period. The decrease in net
income was primarily due to increased operating and general and administrative
expenses as previously discussed.
Liquidity and Capital
Resources
Cash
flow from operating activities was $796,635 for the year ended December 31,
2002, compared to $868,152 for the year ended December 31, 2001. The decrease
in cash flow from operating activities was primarily due to the net loss of the
Company adjusted by gain on sale of property offset by an increase in accrued
oil and gas sales, for the year ended December 31, 2001.
Cash
flow provided by investing activities was $224,216 in the period ended December
31, 2002, compared to $1,754,846 in cash flow used by investing activities for
December 31, 2001. This is primarily
due to decreased purchases of oil and gas properties and property development
cost in 2002. Cash flow used by financing activities was $969,668 for the
period ended December 31, 2002, compared to $588,432 in cash flow provided by
financing activities for the same period in 2001. This was primarily due to
decreases in advances of long-term debt, net of repayment; and a decrease in
proceeds from the exercise of options and warrants.
Capital Requirements
Management
believes the Company will be able to meet its current operating needs through
internally generated cash from operations. Management believes that oil and gas
property investing activities in 2003 can be financed through cash on hand,
cash from operating activities, and bank borrowing. The Company anticipates continued investments in proven oil and
gas properties in 2003. If bank credit is not available, the Company may not be
able to continue to invest in strategic oil and gas properties. The Company cannot predict how oil and gas
prices will fluctuate during 2003 and what effect they will ultimately have on
the Company, but Management believes that the Company will be able to generate
sufficient cash from operations to service its bank debt and provide for
maintaining current production of its oil and gas properties. The Company had
no significant commitments for capital expenditures at December 31, 2002. The
timing of most capital expenditures for new operations is relatively
discretionary. Therefore, the Company can plan expenditures to coincide with
available funds in order to minimize business risks.
Quantitative And Qualitative Disclosures
About Market Risk
We periodically enter into
certain commodity price risk management transactions to manage our exposure to
oil and gas price volatility. These transactions may take the form of futures
contracts, swaps or options. All data relating to our derivative positions is
presented in accordance with requirements of SFAS No. 133, which we
adopted on January 1, 2001. Accordingly, unrealized gains and losses
related to the change in fair market value of derivative contracts that qualify
and are designated as cash flow hedges are recorded as other comprehensive
income or loss and such amounts are reclassified to oil and natural gas sales
revenues as the associated production occurs. Derivative contracts that do not
qualify for hedge accounting treatment are recorded as derivative assets and
liabilities at market value in the consolidated balance sheet, and the
associated unrealized gains and losses are recorded as current expense or
income in the consolidated statement of operations. While such derivative
contracts do not qualify for hedge accounting, management believes these
contracts can be utilized as an effective component of commodity price risk
management activities. At December 31, 2001, we have approximately 9,000
barrels of oil subject to put options with a floor price of $21.50 per barrel.
The Company paid premiums totaling $22,500 in association with the
transactions, which are expensed as part of the realized loss on
derivatives. Unrealized loss relating
to the market exposure of positions was less than $1,000 at December 31, 2001
and there were no open positions at December 31, 2002. For 2002 and
2001, we recorded a realized loss on derivative transactions of $37,869 and $42,947.
Critical Accounting Policies and Estimates
Our accounting policies are
described in Note 1 to Notes to Consolidated Financial Statements in Item 7. We
prepare our Consolidated Financial Statements in conformity with accounting
principles generally accepted in the United States of America ("U.S.
GAAP"), which require us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the year. Actual results could differ
from those estimates. We consider the following policies to be most critical in
understanding the judgments that are involved in preparing our financial
statements and the uncertainties that could impact our results of operations,
financial condition and cash flows.
Successful Efforts Method of Accounting
We account for our exploration and development activities utilizing the successful efforts method of accounting. Under this method, costs of productive exploratory wells, development dry holes and productive wells and undeveloped leases are capitalized. Oil and gas lease acquisition costs are also capitalized. Exploration costs, including personnel costs, certain geological and geophysical expenses and delay rentals for oil and gas leases, are charged to expense as incurred. Exploratory drilling costs are initially capitalized, but charged to expense if and when the well is determined not to have found reserves in commercial quantities. The sale of a partial interest in a proved property is accounted for as a cost recovery and no gain or loss is recognized as long as this treatment does not significantly affect the unit-of-production amortization rate. A gain or loss is recognized for all other sales of producing properties.
The application of the successful efforts method of accounting requires managerial judgment to determine the proper classification of wells designated as developmental or exploratory which will ultimately determine the proper accounting treatment of the costs incurred. The results from a drilling operation can take considerable time to analyze and the determination that commercial reserves have been discovered requires both judgment and industry experience. Wells may be completed that are assumed to be productive and