Thread: Strong Buy KFG - KFG Resources Ltd
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Old 03-29-2013, 01:33 AM   Nav to Top 
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Interim Financial Statement

As of January 31st 2013

Cash on hand $830,550
Accounts Receivable $428,833
Market Securities & prepaid expenses $7,660

Reclamation Bond $20,000

Property & Equipment $1,454,376

Total Assets : $2,741,419

Debt & Liabilities $431,823


The Company’s primary producing oil and gas reserves are located in the Dale Lease, Concordia Parish, Louisiana, Board of Education wells, Franklin Co, Mississippi and the Galtrey Wagner 1-1 and 50-10 wells in the Fayette Field, Jefferson County, Mississippi as well as the Spring Hill #1,2,5 and 7 wells and the 26-1 and 26-2 wells - all at the Fayette Field. Production is averaging 120-130 BOPD at Fayette. A new well in Concordia Parish, Louisisana, the Miller #1, has been put on production making 25 BOPD. KFG has a 5% WI in the Miller well reverting to an 18% WI at payout. A well was drilled in Adams Co., MS to 6,300’ the MacNeil #1, and was completed as a dryhole. A second well, the MacNeil #2 , was completed in early
March 2013, flowing 75 BOPD. KFG’s WI in the MacNeil is 8% before payout reverting to a 20% WI after payout.

The 3D seismic has been reprocessed and additional drilling will take place in 2013 based on the new 3D interpretations at Fayette. In addition, 9 new projects are in various stages of completion in Mississippi.
Production for the three months ended January 31, 2013 was 2.16 mcf of gas/day and 91.56 barrels of oil/day. Production for the three months ended January 31, 2012 was 3.73 mcf of gas/day and 79.53 barrels of oil/day

Revenue from the sale of oil and gas was $2,246,912 for nine months ended January 31, 2013, compared to $2,631,427 for the nine months ended January 31, 2012. The decrease in revenue is a result of a lesser price for crude oil and declining production volumes.

The Company reported net income of $315,507 for the nine months ended January 31, 2013 compared to net income of $52,094 for the nine months ended January 31, 2012, with the increase in net income a result of lower depletion, fewer drilling and dryhole costs and substantially less operating, office and salary expenses.

During the three month period ending January 31, 2013, the #1 Miller well, Concordia Parish, Louisiana, was put on production for 25 BOPD. In March 2013, the #2 MacNeil was completed flowing 75 BOPD. Both wells will add to revenues going forward but the full impact won’t be felt until payout, estimated to be during the late summer of 2013. The quarter ended January 31, 2013 evidenced a return to profitability because no dry holes were drilled.
The Company’s main sources of liquidity are internally-generated cash flow from its oil and gas operations and access to equity capital markets. Because KFG’s internally-generated cash flow is presently sufficient to fund its overall operating expenses, the Company will not require continued additional funding in order to execute on its business strategy. The Company anticipates that public capital markets will serve as the principal source of capital to finance its future oil and gas activities and/or significant property purchases. Changes in the capital markets, including a decline in the prices of natural gas and oil, could materially and adversely impact on KFG’s ability to complete further equity financings, with the result that the Company may be forced to scale back its operational activities.

KFG had cash at January 31, 2013 of $830,550. The new oil production at Fayette, currently about 120 BOPD, is providing positive cashflow and will continue to do just that. Also the Company’s new oil revenues will provide a borrowing base the Company did not have before the Fayette development. As of now, the Company plans to expand as cashflow permits. It is anticipated the Company will have sufficient internal cashflow to continue its drilling program at Fayette through calendar year 2013. The new well, the KFG 26-1 is expected to contribute additional cash flows replacing the production from wells at Spring Hill as they begin a slow decline. The 26-1 well is currently producing 10 BOPD. The Smith 26-2 well at Fayette is producing 5 BOPD and the Company has drilled two new projects, one in Louisiana and one in Mississippi. The Spring Hill #1 well has been recompleted and production jumped from 10 BOPD to 50 BOPD and has leveled out to 30 BOPD. The Company has adequate cash and cash flow to fund its program for fiscal 2013. The two new projects undertaken, one in Conordia Parish, Louisiana (Clayton Prospect) and one in Adams Co., MS (Carthage Point Prospect) have been completed – each with additional potential. At Clayton, the #1 Miller is producing 25 BOPD and if production holds up, other wells will be considered to be put back on production. At Carthage Point, the #2 MacNeil is flowing 75 BOPD and 15 Bbls water/day and a north offset has been staked and should be drilled within 90 days.

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.

The total number of shares outstanding as at January 31, 2012 and March 28, 2013, is 50,584,144. As of January 31, 2013 and Mach 28, 2013, there were 2,750,000 stock options outstanding. As there is no vesting schedule attached to the stock options, all options are exercisable. There were no warrants outstanding as at January 31, 2013 or March 28, 2013. Assuming all outstanding stock options be exercised, the Company would receive additional proceeds of $CDN 275,000. The expiration
date of the outstanding stock options is October 14, 2013
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