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SFPI > SEC Filings for SFPI > Form 10-Q/A on 15-Nov-2012All Recent SEC Filings

Show all filings for SANTA FE PETROLEUM, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q/A for SANTA FE PETROLEUM, INC.


15-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a development stage oil and gas company led by an experienced management team and focused on production of oil and natural gas. Our business plan is to acquire oil and gas properties for appraisal and development. Through the Land Bank arrangement and similar arrangements, we plan to gain control over substantial oil and gas prospects, which will be acquired from the Land Bank(s) from time to time as we are prepared to begin our appraisal and drilling operations on specific leases. We will employ strict selection guidelines for our projects including but not limited to 1) priority to projects with near term cash flow potential, pay-back period, quantity and quality of oil and gas reserves and utilizing premier oilfield services and engineering firms in analyzing and conducting our operations. Until we form a subsidiary that is qualified to be the operator under our oil and gas leases, an affiliated company will act as contract operator.

In 1997 our chairman of the board, Tom Griffin, established Santa Fe Petroleum, LLC, a Texas limited liability company engaged in oil and gas operations ("SFP2") that subsequently ceased operations and forfeited its status with the Texas Secretary of State in 2006. In 2010, Mr. Griffin formed a new entity, SFP, as a business to engage in oil and gas exploration and production. SFP2 drilled 25 vertical and horizontal wells in East Texas and achieved significant aggregate returns for investors in those projects. As of the date of this Form 8-K/A, SFP is a holding company with no oil and gas operations, and we have no ownership in the prior business or wells drilled in East Texas. In December 2009 that business drilled the Test Well on a 76-acre lease in the Bend Arch-Fort Worth Basin in Texas. Baker Hughes, a top-tier oilfield services company, interpreted the logs and Weatherford Laboratories, who is engaged in all facets of rock and fluid analysis for the purpose of evaluating hydrocarbon resources around the world, analyzed the core samples. The Baker Hughes log interpretation report at the Test Well site was based on an 80-acre project. The side-wall core samples were taken every two feet beginning a few feet below the Barnett Shale in the Ellenberger formation and above the Barnett Shale a few feet in the Marble Falls formation. The results show oil exists in a porous, 101-feet-thick blanket formation with the top of the formation at the initial test-well location at a depth of approximately 2,600 feet below the surface. In order to exploit this opportunity, Mr. Griffin and the investors in the Test Well formed SFO, a Texas corporation, in 2011. SFO's wholly owned subsidiary, SFL, which was originally incorporated in Texas in 2009, owns the 76-acre oil and gas lease and the Test Well. Aside from acquiring the Test Well and associated leases, SFO and SFL have not conducted any operations and have not begun oil and gas production from the Test Well. As a result of the Exchange on May 10, 2012, SFO and SFL became our wholly owned subsidiaries..

The Company believes that for the foreseeable future, the world will be highly dependent on oil and natural gas. Currently, alternative fuels are far more expensive than fossil fuels and because of the politically unstable conditions of many of the energy producing regions of the world, the Company believes that oil and natural gas will remain a key yet volatile component of the world's future energy requirements. Additionally, with the ever increasing world demand for energy, the domestic production of oil and gas will play an even greater role in America's future then it already has to date.

Recent Events

Effective July 10, 2012, the Company dismissed Weinberg & Baer LLC ("Weinberg") as the Registrant's certifying accountants. The Registrant's Board of Directors approved this action. The reports of Weinberg on the Registrant's financial statements for each of the fiscal years ended December 31, 2011 and 2010 and the interim period ended March 31, 2012 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that their report expressed substantial doubt as to the Registrants ability to continue as a going concern.

On July 10, 2012, the Company engaged Rothstein Kass as its new independent accountant. The Registrant's Board of Directors approved this action. The decision to dismiss Weinberg and to engage Rothstein Kass was based on the Registrant's business plan for the acquisition, exploration and development of oil and gas properties.

On August 7, 2012, the Registrant announced that they have retained the services of Steven Crane to serve as the interim Chief Operating Officer of the Company. Mr. Crane is the Managing Partner of ProOperate LLC, a professional operations management firm based in Dallas, Texas. Mr. Crane possesses over thirty years of broad-based strategic operations and financial management experience beginning his career with PricewaterhouseCoopers, serving clients in the energy and oil production industry. Mr. Crane is assisting the Company with its transition from a privately-held to a publicly-traded corporation, with its capital structure and funding, and in the implementation of its plans for future growth.

The Board of Directors of the Registrant approved the retention of Mr. Crane's services as interim Chief Operating Officer effective July 10, 2012.

Results of operations

Revenues:

The Company is in the development stage and has not obtained revenue under its business plan.

Operating Expenses:

Operating expenses increased $146,966, or 108%, to $283,238 for six months ended June 30, 2012 from $136,272 for period from May 11, 2011 (commencement of operations) through June 30, 2011. Operating expenses increased $33,831, or 25%, to $170,103 for three months ended June 30, 2012 from $136,272 for period from May 11, 2011 (commencement of operations) through June 30, 2011. The Company operating expenses have been primarily accrued compensation and professional
(legal) related to completing the Share Exchange and becoming a publicly traded company.

Capital Commitments, Capital Resources and Liquidity

Capital commitments. The Company's primary needs for cash are (i) to fund drilling and development costs associated with well development within its leasehold properties, (ii) the further acquisition of additional leasehold assets, and iii), the payment of contractual obligations and working capital obligations. Initially, funding for these cash needs will be provided by the sale of equity from a $5 million private placement memorandum. Subsequently, this will be supplemented by a combination of internally-generated cash flows from operations and equity and or debt financing sources.

Capital resources and liquidity. The Company's primary capital resources from May 11, 2011 (commencement of operations) through June 30, 2012, have been from funds provided by affiliated related parties. We believe that funds from our $5 million private placement memorandum of common stock should be sufficient to meet both our short-term working capital requirements and our 12 month capital expenditure plans.

Cash flow from operating activities. The Company had no cash flow from operating activities for the six and three months ended June 30, 2012 and for the period from May 11, 2011 (commencement of operations) through June 30, 2011.

Cash flow used in investing activities. The Company had no cash flow from investing activities for the six and three months ended June 30, 2012 and for the period from May 11, 2011 (commencement of operations) through June 30, 2011.

Cash flow from financing activities. The Company had no cash flow from financing activities for the six and three months ended June 30, 2012 and for the period from May 11, 2011 (commencement of operations) through June 30, 2011.

Liquidity. At June 30, 2012 and December 31, 2011, the Company had no cash and cash equivalents, a working capital deficit of $701,247 and a deficit accumulated during the development stage of $824,828.

A critical component of our operating plan is the ability to obtain additional capital through additional equity or debt financing. We do not believe that existing capital and anticipated funds from operations will be sufficient to execute our strategic plan during 2012 without either equity or debt financing. We have engaged an investment bank to raise up to $5 million in a private placement of our common stock. We believe that the $5 million of funding will provide sufficient capital to conduct our business plan over the next twelve months. We cannot ensure that financing will be available in amounts or on terms acceptable to us, if at all, and failure to secure the necessary financing could have a significant impact on our ability to continue as a going concern. We plan to seek additional capital in the future to fund growth and expansion through additional equity or debt financing. No assurance can be made that such financing will be available.

As discussed previously, we intend to purchase leases from the Land Banks pursuant to the Lease Acquisition Agreements. The source of funds for the Initial Payment will be from the anticipated closing of the Company's current $5 million private placement.

We anticipate incurring operating losses over the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in their early stage of development, particularly companies in the oil and gas exploration industry. To address these risks we must, among other things, implement and successfully execute our business strategy. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition, and results of operations.

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