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FPP > SEC Filings for FPP > Form 10-Q on 14-Nov-2012All Recent SEC Filings

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Form 10-Q for FIELDPOINT PETROLEUM CORP


14-Nov-2012

Quarterly Report


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company's Condensed Consolidated 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.

General

FieldPoint Petroleum Corporation derives its revenues from its operating activities including sales of oil and natural gas and operating oil and natural gas properties. The Company's capital for investment in producing oil and natural 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.

Results of Operations

Comparison of three months ended September 30, 2012 to the three months ended
September 30, 2011



                                                             Quarter Ended September 30,
                                                               2012                 2011
Revenue:
Oil sales                                                 $     2,131,526        $ 1,486,546
Natural gas sales                                                 135,394            220,664

Total oil and natural gas sales                           $     2,266,920        $ 1,707,210

Sales volumes:
Oil (Bbls)                                                         24,214             17,203
Natural gas (Mcf)                                                  40,565             50,300

Total (BOE)                                                        30,975             25,586

Average sales prices:
Oil ($/Bbl)                                               $         88.03        $     86.41
Natural gas ($/Mcf)                                                  3.34               4.39

Total ($/BOE)                                             $         73.19        $     66.72

Costs and expenses ($/BOE)
Lease operating expense                                   $         21.28        $     26.75
Depletion and depreciation                                          16.38              11.82
Accretion of discount on asset retirement obligations                0.71               0.82
General and administrative                                           9.65               8.19

Total                                                     $         48.02        $     47.58

Oil and natural gas sales revenues increased 33% or $559,710 to $2,266,920 for the three-month period ended September 30, 2012 from the comparable 2011 period. Average oil sales prices increased 2% to $88.03 for the three-month period ended September 30, 2012 compared to $86.41 for the period ended September 30, 2011. Average natural gas sales prices decreased 24% to $3.34 for the three-month period ended September 30, 2012 compared to $4.39 for the period ended September 30, 2011. Sales volumes increased 21% on a BOE basis, primarily due to production from the two new wells in New Mexico completed in December, 2011 and September 2012. The higher sales volumes accounted for an increase in revenue of approximately $563,000 which was offset by approximately $3,000 due to lower commodity prices. We anticipate volumes to increase in the coming quarters primarily due to production from the new well in New Mexico completed in September 2012.

Lease operating expenses decreased 4% or $25,164 to $659,227 for the three month period ended September 30, 2012 from the comparable 2011 period. This was primarily due to decreases in costs associated with remedial repairs in 2012 as compared to 2011 offset by costs associated with new field production. Lifting


costs per BOE decreased 20% or $5.47 to $21.28 for the period primarily due to higher production. We anticipate lease operating expenses to increase over the following quarters due to additional remedial repairs and workover expenses and production costs related to the new well completed in September 2012 in New Mexico.

Depletion and depreciation increased 68% or $205,000 to $507,500 for the three month period ended September 30, 2012 versus $302,500 in the 2011 comparable period. This was primarily due to the addition of the East Lusk wells #1 and #2 completed in December 2011 and September 2012, respectively and higher production during the quarter ended September 30, 2012 as compared to the same period in 2011.

General and administrative overhead cost increased 43% or $89,274 to $298,830 for the three-month period ended September 30, 2012 from the three-month period ended September 30, 2011. This was primarily attributable to an increase in legal, consulting and administration services during the 2012 period. At this time, the Company anticipates general and administrative expenses to remain stable or increase slightly in the coming quarters.

Other expense, net for the quarter ended September 30, 2012, were $330,024 compared to other income, net of $105,204 for quarter ended September 30, 2011. The net increase was primarily due to a $314,000 unrealized loss and a $51,681 realized gain on commodity derivatives during the 2012 period. We expect the unrealized loss to decrease in the coming quarters.

Results of Operations

Comparison of Nine Months Ended September 30, 2012 to the Nine Months Ended
September 30, 2011



                                                             Nine Months Ended September 30,
                                                               2012                   2011
Revenues:
Oil sales                                                $      7,062,474       $      4,771,225
Natural gas sales                                                 546,023                511,944

Total                                                    $      7,608,497       $      5,283,169

Sales volumes:
Oil (Bbls)                                                         77,312                 51,213
Natural gas (Mcf)                                                 126,759                105,519

Total (BOE)                                                        98,439                 68,800

Average sales prices
Oil ($/Bbl)                                              $          91.35       $          93.16
Natural gas ($/Mcf)                                                  4.31                   4.85

Total ($/BOE)                                            $          77.29       $          76.79

Costs and expenses ($/BOE)
Lease operating expense                                  $          24.84       $          27.68
Depletion and depreciation                                          15.01                  11.53
Accretion of discount on asset retirement obligations                0.69                   0.92
General and administrative                                           9.21                   9.80

Total                                                    $          49.75       $          49.93

Oil and natural gas sales revenues increased 44% or $2,325,328 to $7,608,497 for the nine month period ended September 30, 2012 from $5,283,169 for the comparable 2011 period. This was due primarily to the overall increase in production. Sales volumes increased 43% on a BOE basis primarily due to production from the


two new wells in New Mexico completed in December 2011 and September 2012. Average oil sales prices decreased 2% to $91.35 for the nine month period ended September 30, 2012 compared to $93.16 for the nine month period ended September 30, 2011. Average natural gas sales prices decreased 11% to $4.31 for the nine month period ended September 30, 2012 compared to $4.85 for the nine month period ended September 30, 2011. The higher sales volumes accounted for an increase in revenue of approximately $2,534,000 which was offset by approximately $209,000 due to lower commodity prices. We anticipate volumes to increase in the coming quarters primarily due to production from the new well in New Mexico completed in September 2012.

Lease operating expenses increased 28% or $541,171 to $2,445,389 for the nine month period ended September 30, 2012 from the comparable 2011 period. This was primarily due to the costs associated with new field production in 2012 as compared to 2011 and to the increase in additional repairs and workover expenses on properties in 2012. Additionally, we had a one-time charge to settle a severance tax claim for the period from 2006 through 2011 of approximately $251,000. Lifting cost per BOE decreased 10%, from $27.68 to $24.84 for the period primarily due to higher production. We anticipate lease operating expense to increase over the following quarters due to additional remedial repairs and workover expenses and expenses associated with the new East Lusk #2 well completed in September 2012.

Depletion and depreciation expense increased 86% to $1,477,500, compared to $793,500 for the comparable 2011 period. This was primarily due to the addition of the new East Lusk wells and increased sales volumes during the current period.

General and administrative overhead cost increased 34% or $232,069 to $906,549 for the nine month period ended September 30, 2012 from the nine month period ended September 30, 2011. This was attributable primarily to an increase in salaries, bonuses, administrative services such as contract labor and professional services. In the coming quarters we anticipate general and administrative expenses to remain stable or increase slightly.

Other income, net for the nine months ended September 30, 2012, amounted to $34,110 compared to other expenses, net of $99,209 for the comparable 2011 period. The net increase was primarily due to a $129,012 realized gain on commodity derivatives during the 2012 period. We expect the unrealized gain to decrease and realized gain to increase in the coming quarter.

Liquidity and Capital Resources

Cash flow provided by operating activities was $2,765,428 for the nine month period ended September 30, 2012, as compared to $2,444,818 of cash flow provided by operating activities in the comparable 2011 period. The increase in cash flows from operating activities was primarily due to changes in net income, and increased depletion expense offset by a decrease in accounts payable.

Cash flow used in investing activities was $3,666,153 for the nine month period ended September 30, 2012 which included approximately $2,489,000 for drilling the Lusk #2 well completed in September 2012. Cash flow used in investing activities was $421,646 for additions to oil and natural gas properties during the nine month period ended September 30, 2011.

Cash flow provided by financing activities was $193,589, net after expenses of approximately $63,769, from the sale of 60,761 shares of stock during the nine months ended September 30, 2012. Cash flow used in financing activities was used to repurchase 80,000 shares of common stock for a total of $323,373 during the nine month period ended September 30, 2011.

We may continue to raise financing through draws from our line of credit. Effective May 11, 2012, the borrowing base under our line of credit was increased from $9,250,000 to $11,000,000. We anticipate our operating cash flow and other capital resources, including our Citibank revolving credit facility, if needed, will


adequately fund planned capital expenditures and other capital uses over the near term. Based on industry outlook for the remainder of 2012, prices for oil could be higher than the prior year but may be lower for natural gas.

Through September 30, 2012, we have sold an aggregate of 60,761 shares of common stock in the ATM Offering, realizing net proceeds of $193,589. An additional 839,239 shares of common stock have been registered for sale in the ATM Offering, which may continue until May 16, 2014 unless terminated sooner as provided for in the Sales Agreement with MLV. As there is no commitment for future sales of additional shares, we cannot predict how much, if any, additional proceeds may be realized in the ATM Offering.

PART I

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