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XTOG > SEC Filings for XTOG > Form 10-Q on 20-May-2013All Recent SEC Filings

Show all filings for XTREME OIL & GAS, INC.

Form 10-Q for XTREME OIL & GAS, INC.


Quarterly Report

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


This Quarterly Report on Form 10-Q (the "Report") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Discussions containing such forward-looking statements may be found in Part I. Items 2 and 3 hereof, as well as within this Report generally. All statements, other than statements of historical facts, concerning, among other things, planned capital expenditures, potential increases in oil and natural gas production, the number and location of wells to be drilled in the future, future cash flows and borrowings, pursuit of potential acquisition opportunities, our financial position, business strategy and other plans and objectives for future operations, are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as "may," "expect," "estimate," "project," "plan," "believe," "intend," "achievable," "anticipate," "will," "continue," "potential," "should," "could" and similar terms and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements. One should consider carefully the statements under the "Risk Factors" section of our Annual Report on Form 10-K filed with the SEC (the "Form-10K"), which describe factors that could cause our actual results to differ from those anticipated in the forward-looking statements, including, but not limited to, the following factors:

our ability to successfully develop our undeveloped acreage primarily held in Texas;

volatility in commodity prices for oil and natural gas;

the possibility that the industry may be subject to future regulatory or legislative actions (including any additional taxes and changes in environmental regulation);

the presence or recoverability of estimated oil and natural gas reserves and the actual future production rates and associated costs;

the potential for production decline rates for our wells to be greater than we expect;

our ability to generate sufficient cash flow from operations, borrowings or other sources to enable us to fully develop our undeveloped acreage positions;

our ability to replace oil and natural gas reserves;

environmental risks;

drilling and operating risks;

exploration and development risks;

competition, including competition for acreage in resource-style areas;

management's ability to execute our plans to meet our goals;

our ability to retain key members of senior management and key technical employees;

our ability to obtain goods and services, such as drilling rigs and tubulars, and access to adequate gathering systems and pipeline take-away capacity, necessary to execute our drilling program;

our ability to secure firm transportation for natural gas we produce and to sell natural gas at market prices;

general economic conditions, whether internationally, nationally or in the regional and local market areas in which we do business, may be less favorable than expected, including the possibility that the economic recession and credit crisis in the United States will be prolonged, which could adversely affect demand for oil and natural gas and make it difficult to access financial markets;

continued hostilities in the Middle East and other sustained military campaigns or acts of terrorism or sabotage; and

other economic, competitive, governmental, legislative, regulatory, geopolitical and technological factors that may negatively impact our business, operations or pricing.

Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in the section entitled "Risk Factors" included in the Form 10-Q. All forward-looking statements are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere in this document. Other than as required under the securities laws, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. - continued


Xtreme Oil & Gas, Inc. is an independent energy company focused on the acquisition, development, ownership, operation and investment in energy-related businesses and assets, including, without limitation, the acquisition, exploration and development of natural gas and crude oil, and other related businesses which management believes have potential for improved production rates and resulting income by application of both conventional and non-conventional improvement and enhancement techniques. As of March 31, 2013 we own working interests in over 10,000 acres of oil and gas leases in Kansas, Texas and Oklahoma that now include 10 gross producing wells and 55 gross non-producing wells. Xtreme plans to pursue continued sales of its properties while potentially retaining non-operated interests that may produce future cash flows.

During the first quarter 2013, the Saltwater Disposal well project was placed back into full time operations.

Our revenues are derived from the sale of oil and gas products and sale of interests, principally in drilling programs. In 2008 we derived a small amount of revenue from contract drilling on one project, the Oil Creek, but have no plans to engage in contract drilling in the future.

When we sell working interests in our leases, we maintain a deposits payable liability and recognize revenue as the development related to the working interest is completed. After completion, costs incurred to maintain wells and related equipment and lease and well operating costs are charged to expense as incurred.

We have been an operating company since 2006 with the acquisition of Emerald Energy and have had revenues from operations for more than four years.

Results of Operations.

For the Three months Ended March 31, 2013 compared to 2012


For the three months ended March 31, 2013, revenue was $48,964 a decrease of $842,886 from $891,850 for the three months ended March 31, 2012. Decrease in revenue was due primarily to the oil properties being shut down since mid-2012. Oil and gas revenues are principally from the Saltwater Disposal project. The decline is also attributable to the fact that in the earlier period we sold working interests in various prospects we held, sales that did not occur in the period ending March 31, 2013.


Oil production costs for the three months ended March 31, 2013 totaled $459, a decrease of $11,224 from $11,683 for the three months ended March 31, 2012. The decrease is due to reduced production activity on all of our properties.

General and administrative expenses totaled $243,682 for the three months ended March 31, 2013, a decrease of $166,568, from $410,250 for the three months ended March 31, 2012. These general and administrative expense differences are largely driven by reduced costs of professional services during the three months ended March 31, 2013.

Loss on disposal of properties totaled $0 for the three months ended March 31, 2013, a decrease of $20,364, from $20,364 for the three months ended March 31, 2012.

Other Income/(Expense)

Other income and expense are largely driven by our debt offering in September 2011. Total other income for the three months ended March 31, 2013 was $21,714 an increase of $616,754 from total other expense of $595,040 for the three months ended March 31, 2012. This decrease was entirely due to a reduction in charges for derivative liabilities related to our September 2011 debt offering.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. - continued

Net loss

For the three months ended March 31, 2013, we had a net loss of $174,103 compared to a net loss of $254,962 for three months ended March 31, 2012. This decrease in net loss was due primarily to non-cash derivative expense related of convertible debt instruments during the period ended March 31, 2013.

Liquidity and Capital Resources

Our plan has been for our field operations to provide sufficient liquidity for daily operating capital and further development. We have also sold working interests in our properties and incurred debt to also provide capital to acquire properties and develop them when the cash flow from those operations would sustain our operations and provide for growth. Currently all of our properties need additional capital to develop, and we have failed to make payments on indebtedness incurred in September 2011, indebtedness in which we are in default.

In need of capital to develop properties and expand, in June 2012 we pursued several funding opportunities based on the belief that the assets owned, if developed, would satisfy our current operating and development needs and provide for our growth. We are currently pursuing sales of our properties and conversions from debt to equity to reduce our debt.

Financing Plans

Cash flow used by operations was $62,362 for the three months ending March 31, 2013. Cash flow used in investing activities was $28,105 for the three months ended March 31, 2013. Cash flow provided by financing activities was $64,850 for the three months ended March 31, 2013.

Deposits payable at March 31, 2013 include $335,000 for the Smoky Hill Two well Project in process at March 31, 2013. We expect this project to complete during the second quarter at which time these liabilities will be removed from the balance sheet.

Convertible notes payable are presented net of debt discount. Principal balance at March 31, 2013 was $1,485,764. The Company delayed scheduled payments on the convertible notes for the months beginning June 2012 to December 2012. This resulted in a default on the note agreement. Interest is being accrued at a rate of 18% as a result of the default. A significant amount of the convertible notes outstanding converted subsequent to March 31, 2013, and we are pursuing the conversion of all such notes that remain outstanding. The Company may seek to increase its authorized capital to effect the transaction.

Our cash requirements, mostly for corporate expenses, are projected to be approximately $80,000 per month or $960,000 for the next 12 months, and our drilling activity has been funded from drilling programs. As of March 31, 2013, we are unable to determine whether we will generate sufficient cash from our oil and gas operations to fund our operations for the next twelve months. Revenue from existing oil production is non-existent on a monthly basis, and we cannot predict whether our cash flows from the future sales of assets and debt conversions into equity will be sufficient to meet our monthly cash requirements.

To continue with our business plan including the funding of operations, we expect to continue selling properties and converting debt to equity. To that end we have entered into an agreement, effective April, 15, 2013 related to the sale of our Kansas and Oklahoma properties. See Notes to Consolidated Financial Statements, Note9, Subsequent Events.

We have substantial indebtedness to officers and directors of our company and have agreed to convert that indebtedness to a preferred stock in the subsequent conversion into restricted common stock.

If required, our ability to obtain additional financing from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects for business growth. The necessary additional financing may not be available or may be available only on terms that would result in excessive further dilution to the current owners of our common stock or at unreasonable costs of capital.

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