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NAMG > SEC Filings for NAMG > Form 10-K on 25-Mar-2014All Recent SEC Filings

Show all filings for NORTH AMERICAN OIL & GAS CORP.

Form 10-K for NORTH AMERICAN OIL & GAS CORP.


25-Mar-2014

Annual Report


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

The following discussion is intended to facilitate an understanding of our business and results of operations and includes forward-looking statements that reflect our plans, estimates and beliefs. It should be read in conjunction with our audited consolidated financial statements and the accompanying notes to the consolidated financial statements included herein. Our actual results could differ materially from those discussed in any forward-looking statements contained herein.

The Company is a development stage enterprise, has never earned a profit, and has incurred an accumulated deficit of $1,927,694 as of December 31, 2013. The Company raised $1,125,000 in the sale of common stock, which gives the Company a negative ($48,191) net equity position. The Company has used these funds to purchase or obtain leaseholds on its three oil and gas lease prospects, drill a well, purchase seismic data and provide for general and administrative expenses. As of December 31, 2013, NAMOG had completed the drilling and testing of seven zones in Well 77-20, located on the Tejon Extension lease. The well was suspended in February 2013.

The Company licensed seismic data over a 3,429 gross acres (2,946 net acres) over our Tejon Extension and Tejon Main prospect and consulting geologists completed an exhaustive analysis on this 3D survey in September 2013. We have finished the mapping and volumetric analysis of the 14 prospects previously identified. We have further refined the extent of, and reducing the associated technical risk, of these prospects. This work will allow the Company to prioritize its prospect inventory in terms of geologic risk, resource potential, drilling difficulty and permitting issues.

The prospects include 5 target horizons: the Eocene, Vedder, JV, Olcese, Reserve and Transition Zone. The 3D interpretation shows traps that were untested in the previous drilling campaign because we did not have this data to drive the Company's development programs.


This seismic evaluation also indicated new targeted zones to test in our shut-in Well 77-20. NAMOG has budgeted to reopen the Well 77-20 late in the fourth quarter 2014 for further testing at a budgeted cost of NAMOG 's share of $100,000. This testing, however, is predicated on the Company's ability to raise sufficient capital to proceed.

Based on the finding in the 3D evaluation, the Company has budgeted to drill a well on the Tejon Main prospect, in late-2014 subject to the Company's ability to raise sufficient capital to fund the project. The Company has started the permitting process of two wells.

The Company oversaw an aggressive acquisition program in the White Wolf prospect. Within the first six months of this program, the Company acquired additional leases in this prospect totaling approximately 1,156 gross (1,054 net) acres in this prospect.

NAMOG has sufficient funds, due largely to sales of the Company's common stock for $1,000,000 to continue general and administrative operations through December 31, 2014. Capital raising through investors and/or farm-out agreements will be required to move forward on capital projects.

Plans for our fiscal year 2014 include the following:

Subject to obtaining additional financing, the following drilling and testing may be pursued. The projects with our working interest ("WI") share (based on our WI as listed) of the estimated costs are listed below:

Estimated cost based on expected participating working interest.

Project            Current WI%       No. Wells    Procedure    Est. Cost

Tejon Main                   40 %             1   New Drill   $     2.5MM
Tejon Extension              75 %             1   New Drill   $     1.0MM

Results of Operations

Year Ended December 31, 2013 Compared With Year Ended December 31, 2012

Revenues from Operations - Revenues for the year ended December 31, 2013 and December 31, 2012 were $0 and $0 respectively.

Expenses from Continuing Operations - The Company incurred operating expenses of $1,518,179 for the fiscal year ended December 31, 2013; an increase of $1,049,481 compared to $468,698 for the period ending December 31, 2012. The largest expenditures operationally were increased general and administrative costs over the previous year of $709,900, increased costs for exploration and leasehold expenses of $314,832, and an increase of management and consulting costs over the previous year of $17,706. Operating costs for the fiscal year ending December 31, 2013 were specifically: operational general and administrative costs of $931,607, (including $276,269 in stock option expenses under employee compensation, $457,501 in exploration and leasehold expenditures (including $368,955for seismic data), management and consulting fees of $119,480, and depreciation and amortization expenses of $9,590).


Other Income/Loss - For the fiscal year ended December 31, 2013, the Company has $7,310 in other expenses, substantially all of which is related to Franchise Tax Board costs. For the fiscal year ended December 31, 2012, the Company had $800 in other expenses.

Net Loss - For the fiscal year ended December 31, 2013, the Company incurred a net loss of $1,525,488 compared to a net loss of $345,855 for the fiscal year ended December 31, 2012, a loss increase over the previous year of $1,179,633. The major reasons for the Company having a higher net loss during the fiscal year ended December 31, 2013 can be attributed to the higher expenses from overall operations ($1,518,179).

Liquidity - At December 31, 2013, the Company had a cash balance of $49,563. As of December 31, 2012, the Company had a cash balance of $1,515,995, which included restricted cash of $937,067. Property and equipment net was $5,876 as of December 31, 2013 compared to $4,686 as of December 31, 2012. The increase in property and equipment is the direct result of the Company investing in computers and peripherals.

Historically the Company has lacked liquidity, a result of insufficient financing alternatives available to the Company and the lack of production to produce significant revenues.

Based on current expectations, the Company will need to find additional sources of financing to meet our general corporate needs beyond 2014 as well as any large capital requirements necessary for additional oil and gas exploration.

Cash Requirements

The cash requirements of the Company may have a material impact on our liquidity. The reasons for this are:

the Company has only secured sufficient funds to maintain its current operations through December 31, 2014;

there is an uncertainty as to whether the Company can maintain operations beyond the fourth quarter of 2014 without securing additional capital through cash raisings, or investor project participation; and

there is no certainty that the Company can achieve profitable levels in the oil and gas exploration field, or that it will be able to raise additional capital through any means.

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