Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F [ ] Form 20-F [X]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FEC Resources Inc.
(Registrant)
Date: August 22, 2018
By:
/s/ Paul Wallace
Paul Wallace
President, Chief Executive Officer and Chief Financial Officer
Exhibit 1
NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed financial statements for FEC have been prepared by management in accordance with International Financial Reporting Standards. These financial statements, which are the responsibility of management are unaudited and have not been reviewed by the Company's auditors. The Company's Audit Committee and Board of Directors has reviewed and approved these interim financial statements.
The Company's independent auditor has not performed a review of these interim condensed financial statements in accordance with the disclosure requirements of National Instrument 51-102 released by the Canadian Securities Administrators.
FEC RESOURCES INC.
CONDENSED STATEMENT OF FINANCIAL POSITION
Expressed in United States Dollars
As at:
|
|
June 30,
2018
|
|
|
December 31
,
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash
|
|
$
|
341,949
|
|
|
$
|
425,148
|
|
Receivables
|
|
|
2,452
|
|
|
|
960
|
|
Prepaid expenses
|
|
|
782
|
|
|
|
7,145
|
|
|
|
|
345,183
|
|
|
|
433,253
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
355
|
|
|
|
418
|
|
Investment in Forum Energy Limited (Note 9)
|
|
|
1,665,000
|
|
|
|
1,665,000
|
|
|
|
$
|
2,010,538
|
|
|
$
|
2,098,671
|
|
LIABILITIES
Current liabilities
Trade and accrued payables (Note 6)
|
|
$
|
41,252
|
|
|
$
|
33,945
|
|
|
|
|
41,252
|
|
|
|
33,945
|
|
Shareholders' Equity
Share capital (Note 5)
|
|
|
16,732,397
|
|
|
|
16,732,397
|
|
Contributed surplus (Note 5)
|
|
|
3,058,063
|
|
|
|
3,058,063
|
|
Deficit
|
|
|
(17,821,174
|
)
|
|
|
(17,725,734
|
)
|
|
|
|
1,969,286
|
|
|
|
2,064,726
|
|
|
|
$
|
2,010,538
|
|
|
$
|
2,098,671
|
|
The accompanying notes to the interim condensed consolidated financial statements are an integral part of these statements.
SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY:
"Paul Wallace"
"Lyle Brown"
Director
Director
FEC RESOURCES INC.
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Expressed in United States Dollars
UNAUDITED
|
|
Three Month Period Ended
|
|
|
Six Month Period Ended
|
|
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
General and administration expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration (Note 7)
|
|
$
|
54,230
|
|
|
$
|
37,647
|
|
|
$
|
97,846
|
|
|
$
|
78,534
|
|
Operating loss
|
|
|
(54,230
|
)
|
|
|
(37,647
|
)
|
|
|
(97,846
|
)
|
|
|
(78,534
|
)
|
Unrealized gain on investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,965,000
|
|
Interest income
|
|
|
1,276
|
|
|
|
395
|
|
|
|
2,406
|
|
|
|
691
|
|
Net income (loss) and total comprehensive income (loss) for the period
|
|
$
|
(52,954
|
)
|
|
$
|
(37,252
|
)
|
|
$
|
(95,440
|
)
|
|
$
|
1,887,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and diluted
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes to the condensed interim financial statements are an integral part of these statements.
FEC RESOURCES INC.
CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
Expressed In United States Dollars
UNAUDITED
For the six months ended June 30, 2018
|
|
Share capital
|
|
|
Contributed surplus
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2017
|
|
$
|
16,732,397
|
|
|
$
|
3,058,063
|
|
|
$
|
(17,725,734
|
)
|
|
$
|
2,064,726
|
|
Total comprehensive income for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
(95,440
|
)
|
|
|
(95,440
|
)
|
Balance June 30, 2017
|
|
$
|
16,732,397
|
|
|
$
|
3,058,063
|
|
|
$
|
(17,821,174
|
)
|
|
$
|
1,969,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2017
|
|
Share
capital
|
|
|
Contributed surplus
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2017
|
|
$
|
16,732,397
|
|
|
$
|
3,058,063
|
|
|
$
|
(19,528,770
|
)
|
|
$
|
261,690
|
|
Total comprehensive income for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
1,887,157
|
|
|
|
1,887,157
|
|
Balance June 30, 2017
|
|
$
|
16,732,397
|
|
|
$
|
3,058,063
|
|
|
$
|
(17,641,613
|
)
|
|
$
|
2,148,847
|
|
The accompanying notes to the condensed interim financial statements are an integral part of these statements.
FEC RESOURCES INC.
CONDENSED STATEMENTS OF CASH FLOWS
Expressed in United States Dollars
UNAUDITED
|
|
For the six months ended
|
|
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
Cash provided by (used in)
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net (loss) income for the period
|
|
$
|
(95,440
|
)
|
|
$
|
1,887,157
|
|
|
|
|
|
|
|
|
|
|
Non-cash items included in loss
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
63
|
|
|
|
89
|
|
Unrealized gain on investment in Forum Energy
|
|
|
--
|
|
|
|
(1,965,000
|
)
|
|
|
|
(95,377
|
)
|
|
|
(77,754
|
)
|
|
|
|
|
|
|
|
|
|
Changes in working capital related to operating activities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,492
|
)
|
|
|
(149
|
)
|
Prepaid expenses
|
|
|
6,363
|
|
|
|
5,882
|
|
Accounts payable and accrued liabilities
|
|
|
7,307
|
|
|
|
(34,718
|
)
|
Net cash used by operating activities
|
|
|
(83,199
|
)
|
|
|
(106,739
|
)
|
Net increase (decrease) in cash
|
|
|
(83,199
|
)
|
|
|
(106,739
|
)
|
Cash – beginning of the year
|
|
|
425,148
|
|
|
|
312,161
|
|
Cash – end of the period
|
|
$
|
341,949
|
|
|
$
|
205,422
|
|
The accompanying notes to the condensed interim financial statements are an integral part of these statements.
Note 1
Corporate Information
FEC Resources Inc. ("FEC" or the "Company") was incorporated under the laws of Alberta, Canada and is engaged primarily in the business of exploration and development of oil and gas and other mineral related opportunities, either directly or indirectly through companies in which the Company invests. The Company is not currently directly involved in any oil and gas or mineral related exploration activities. The Company is listed in the United States on the OTC Pink ("OTC Pink"), having the symbol FECOF.
At June 30, 2018, the Company has a 6.8% interest Forum Energy Limited ("FEP").
The principal address of the Company is 223 3 Avenue S.W., Calgary, Alberta T2P 0B4. The Company's ultimate parent company is PXP Energy Corporation (formerly Philex Petroleum Corporation) ("PXP") with a registered office at 27 Brixton Street, Barangay Kapitolyo, Pasig City, Metro Manila, Philippines 1603
Note 2
Basis of Preparation
a)
|
Statement of Compliance
|
These condensed interim financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
The financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting and have been prepared using the same accounting policies and methods as were used for the Company's Annual Financial Statements for the years ended December 31, 2017 and 2016. These condensed interim financial statements should be read in conjunction with the Company's annual financial statements dated December 31, 2017.
The condensed interim financial statements were authorized for issue by the Board of Directors on August 17, 2018.
The financial statements have been prepared on a historical cost basis and are presented in United States dollars, which is also the Company's functional currency.
The preparation of financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.
Note 2
Basis of Preparation
(continued)
c)
|
Nature of Operations and Going Concern
|
The exploration and development of oil and gas reserves and the pursuit of other energy and mineral reserves involves significant financial risks. The success of the Company is dependent upon the success of its investments and their ability to discover economically recoverable reserves and to bring such reserves into profitable production, and is subject to a number of risks, including environmental risks, contractual risks, legal risks and political risks, fluctuations in the price of oil and gas and other factors beyond the Company's control. The Company has not generated revenue from operations. The Company has an accumulated deficit since inception of $(17,821,174).
Management considers that the current economic environment is difficult and the outlook for oil and gas exploration companies presents significant challenges in terms of raising funds through issuance of shares. To the extent necessary, the Company has relied on its ability to raise funds via dispositions of quantities of its shareholdings in FEP to PXP under terms that are consistent with the best interests of shareholders, in order to finance its operations. The Company has been successful in disposing quantities of its shareholdings in FEP in previous fiscal years. However, there can be no assurance the Company will continue to be able to dispose of quantities of its shares in FEP under suitable terms. In addition, management has instituted measures to preserve cash through significantly decreasing its corporate costs
.
Note 3
|
Summary of Significant Accounting Policies and Critical Accounts Estimates and Judgments
|
These interim condensed financial statements have been prepared using the same accounting policies and methods of computation as the annual financial statements for the year ended December 31, 2017. In addition, these interim condensed financial statements have been prepared using the same critical accounting estimates and judgments as the annual financial statements for the year ended December 31, 2017. Accordingly, the interim condensed financial statements should be read in conjunction with the financial statements for the year ended December 31, 2017.
Note 4
Standards, Amendments and Interpretations
The Company has prepared its consolidated financial statements in accordance with IFRS as issued by the International Accounting Standards Board ("IASB"). IFRS represents standards and interpretations approved by the IASB and are comprised of IFRS, International Accounting Standards ("IAS's"), and interpretations issued by the IFRS Interpretations Committee ("IFRIC's") and the former Standing Interpretations Committee ("SIC's"). The consolidated financial statements have been prepared in accordance with IFRS standards and interpretations effective as of June 30, 2018.
The following new standards, amendments and interpretations, which have not been early adopted in these financial statements, will not have an effect on the Company's future results and financial position:
IFRS 16
Leases
IFRS 16, Leases ("IFRS 16") will replace IAS 17, "Leases". IFRS 16 specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, unless the lease term is 12 months or less or the underlying asset has a low value. The standard is effective for annual periods beginning on or after January 1, 2019 with early adoption being permitted if IFRS 15, has also been applied. The Company does not have any lease agreements and the adoption of this standard will not impact its financial statements.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.
Note 5
Share Capital
The Company is authorized to issue an unlimited number of common shares without par value; and
The Company is authorized to issue an unlimited number of Class A and Class B preferred convertible redeemable voting shares without par value.
Note 5
Share Capital
(continued)
Issued:
|
|
|
|
|
|
|
Common Shares
|
|
Number
|
|
|
Amount
|
|
Balance December 31, 2017 and June 30, 2018
|
|
|
409,143,765
|
|
|
$
|
16,732,397
|
|
No preferred shares have been issued since the Company's inception.
b)
|
Nature and Purpose of Equity and Reserves
|
The reserves recorded in equity on the Company's balance sheet include Contributed Surplus and Deficit.
Contributed Surplus is used to recognize the value of stock option grants prior to exercise.
Warrants is used to recognize the value of warrant grants prior to exercise.
Deficit is used to record the Company's change in deficit from earnings and losses from period to period.
Note 6
Related Party Transactions and Balances
During the six month period ended June 30, 2018 general and administrative expenses included key management personnel compensation totaling $24,000 (2017: $24,000) (Note 7).
Note 7
|
Nature of Expenses
|
General and administrative expenses include
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
Professional fees
|
|
$
|
16,939
|
|
|
$
|
2,009
|
|
Bank charges
|
|
|
1,673
|
|
|
|
1,662
|
|
Listing and filing fees
|
|
|
12,300
|
|
|
|
5,261
|
|
Office and miscellaneous
|
|
|
12,665
|
|
|
|
11,477
|
|
Consulting (Note 6)
|
|
|
54,000
|
|
|
|
54,000
|
|
Amortization
|
|
|
63
|
|
|
|
89
|
|
Foreign exchange
|
|
|
206
|
|
|
|
4,036
|
|
|
|
$
|
97,846
|
|
|
$
|
78,534
|
|
Note 7
|
Nature of Expenses (continued)
|
General and administrative expenses include
|
|
Three Months Ended June 30, 2018
|
|
|
Three Months Ended June 30, 2017
|
|
Professional fees
|
|
$
|
13,673
|
|
|
$
|
1,399
|
|
Bank charges
|
|
|
879
|
|
|
|
868
|
|
Listing and filing fees
|
|
|
6,180
|
|
|
|
594
|
|
Office and miscellaneous
|
|
|
6,143
|
|
|
|
5,668
|
|
Consulting (Note 6)
|
|
|
27,000
|
|
|
|
27,000
|
|
Amortization
|
|
|
31
|
|
|
|
45
|
|
Foreign exchange
|
|
|
324
|
|
|
|
2,073
|
|
|
|
$
|
54,230
|
|
|
$
|
37,647
|
|
Note 8
Earnings (Loss) Per Share
Weighted Average Number of Common Shares
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
Weighted average number of common shares (basic and diluted)
|
|
|
409,143,765
|
|
|
|
409,143,765
|
|
Note 9
Investment in FEP
On March 23, 2017, PXP announced that it has increased its shareholdings in Forum Energy Limited ("FEP") from 48.8% to 69.5% through a debt conversion for 39,350,920 shares at US$0.30 per share. At the same date
an independent third party purchased 6,666,667 new FEP shares at a price of US$0.30 per share for a total cash payment of US$2,000,000.
These two transactions resulted in the dilution of the Company's interest in FEP from 18.42% to 8.03%.
As a result of this dilution the Company ceased to exercise significant influence over FEP and accordingly accounted for the investment on a cost basis as opposed to an equity basis. As a consequence of this change in accounting, the Company recognized an unrealized gain of $1,965,000 in the statement of operations and comprehensive income.
On December 6, 2017 the Company sold 1,000,000 FEP shares to its parent company, PXP, for $0.30 per share. As a result of the sale of the shares, the Company's interest in FEP was reduced to 6.80%
Note 10
Segmental Reporting
The Company has one reportable operating segment which is
primarily the business of exploration and development of oil and gas and other mineral related opportunities, through companies in which the Company invests.
Exhibit 2
FEC RESOURCES INC. (the "Company")
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2018
(all funds in US. $ unless otherwise stated)
THE FOLLOWING MANAGEMENT DISCUSSION AND ANALYSIS IS PREPARED AS AT AUGUST 17, 2018 AND SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED INTERIM FINANCIAL STATEMENTS AND NOTES FOR THE QUARTER ENDED JUNE 30, 2018 AND THE AUDITED FINANCIAL STATEMENTS AND NOTES FOR THE YEAR ENDED DECEMBER 31, 2017. THOSE FINANCIAL STATEMENTS HAVE BEEN PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS").
Forward Looking Statements
Certain statements in this MD&A, including statements regarding the Company's current funds on hand being able to secure the Company for the foreseeable future, and the Company's ability to sell its shares of Forum Energy Limited ("Forum Energy" or "FEP") to meet its working capital needs and future plans and objectives of the Company are forward-looking information that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate; actual results and future events could differ materially from those anticipated in such statements. Material risk factors that could cause actual results to differ materially from the forward-looking information include unforeseen expenses which the Company may incur and which expenses could cause current funds on hand to not be adequate to secure the Company for the foreseeable future, the possibility of the Company's shares of Forum Energy either declining significantly in value or becoming illiquid such that the Company would not be able to sell such shares if required to meet working capital needs and other risks and uncertainties as disclosed under the heading "Risk Factors" herein. The Company has assumed that it would not be incurring significant expenses in the short term that would exceed its current funds on hand and that there would not be a material adverse change in the financial affairs of Forum Energy or a material adverse change in the liquidity of Forum Energy's shares. The reader is cautioned that assumptions used in the preparation of such information, while considered reasonable by the Company at the time, may prove to be incorrect. The Company has no policy for updating forward-looking information beyond the procedures required under applicable securities laws.
Forum Energy Limited ("Forum Energy")
As June 30, 2018 the Company held 5,550,000 shares representing a 6.80% interest (6.80% December 31, 2017) of the capital of Forum Energy, a private company, which has participating interests in 11 petroleum blocks in the Philippines, five of which are in production and six of which are in the exploration and appraisal stage. Forum Energy and the Company are both ultimately under the control of PXP Energy Corporation ("PXP") and are therefore affiliates. The Company advises that: (i) the sole nature of its petroleum activities is as a holder of 6.80% of the shares of Forum Energy; and (ii) outside of information publicly made available by Forum Energy, it is not privy to information of the status of Forum Energy's oil and gas activities on any of its projects.
On March 23, 2017, PXP announced that it has increased its shareholdings in Forum Energy Limited ("FEP") from 48.8% to 69.5% through a debt conversion for 39,350,920 shares at US$0.30 per share. At the same date
an independent third party purchased 6,666,667 new FEP shares at a price of US$0.30 per share for a total cash payment of US$2,000,000.
The Company did not participate in this financing transaction. There were no changes made to the board of FEP. These two transactions resulted in the dilution of the Company's interest in FEP from 18.42% to 8.03%.
As a result of this dilution, the Company's investment in Forum Energy ceased to be an equity investment. As a result of the loss of significant influence, the Company recognized an unrealized gain of $1,965,000 in the statement of operations and comprehensive income for the revaluation and reclassification of the investment as available for sale during the year. On December 6, 2017 the Company sold 1,000,000 FEP shares to its parent company, PXP, for $0.30 per share. As a result of the sale of the shares the Company's interest in FEP was reduced to 6.80%.
Forum Energy's principal asset is a 70% participating interest in Service Contract 72 ("SC72") (previously
Geophysical Survey and Exploration Contract No. 101 ("GSEC101"), a petroleum license located offshore west of Palawan Island, the Philippines. Forum Energy has completed its work programme commitments for SC72 Sub-Phase 1 of the Exploration Phase from February 15, 2010 to August 14, 2011. The Sub-Phase 1 work programme completed included the acquisition of 564 km
2
of 3D seismic data over the Sampaguita gas field, and 2,202 km of high resolution 2D over the remainder of the 8,800 km
2
contract area. Forum Energy's share of the Sub-Phase 1 work programme was estimated to cost approximately $7.4 million, and was funded through a $15 million facility agreement with Forum Energy's then ultimate parent company, Philex Mining Corporation ("Philex Mining").
In August 2011, Forum Energy entered Sub-Phase 2 of SC72, which includes a commitment to drill up to two wells before August 2013. On April 24, 2012, Forum Energy announced receipt of a report by Weatherford Petroleum Consultants on the interpretation of the SC72 seismic data acquired in 2011. The announcement included a summary of volumetric estimates of unrisked resources initially in place in the Sampaguita Gas Field and North Bank prospect in SC72. The volumentric estimate by Weatherford is said to be an improvement in the resources previously known and supports the case to proceed with the drilling program which is estimated to have a total cost of $75 million.
Forum Energy was unable to commence the Sub-Phase 2 drilling programme in 2012 due to an ongoing territorial dispute between the Philippine and China governments. Recognizing that the delay in implement the drilling programme were for reasons beyond the control of Forum Energy, the Philippine Department of Energy extended the end date of Sub-Phase 2 from August 14, 2013 to August 14, 2016.
On March 4, 2015 the Philippine Department of Energy ("DOE") granted a force majeure on Service Contract 72 ("SC72") because this contract area falls within the territorial disputed area of the West Philippine Sea which was then the subject of an United Nations arbitration process between the Republic of Philippines and the People's Republic of China.
Under the terms of the force majeure, all exploration work at SC72 is immediately suspended (effective from 15 December 2014) until the DOE notifies the Company that it may commence drilling. As a result, the second sub-phase of SC72 was put on hold until further notice.
The terms of the second sub-phase and all subsequent sub-phases will be extended by the term of the force majeure.
On July12, 2016, the Permanent Court of Arbitration in the Hague ruled in favor of the Philippines against China over
territorial disputes
in the South China Sea. China has rejected the ruling. It is uncertain whether this ruling will resolve the dispute between the parties.
The following is a brief description of the properties of Forum Energy currently in production. Service Contract 14 Block C1 Galoc
Forum Energy's largest producing asset is the Galoc oil field located offshore northwest Palawan and has an area of 164 square kilometres and contains the Galoc oil field which was first put in production in 2008. In 2017 production from the Galoc field was 1.46 million barrels which achieved an average selling price of US$53.83 per barrel.
In October 2016, the Galoc Block Consortium approved the drilling of Galoc-7 to test the Mid Galoc Prospect, which is estimated to contain resources of 6.2 million to 14.6 million stock tank barrels. After an extensive review of the well results and potential tie-back scenarios, the Joint Venture (JV) in consideration of the prevailing low crude prices decided to temporarily suspend all activities related to a possible Phase III development and concentrate its efforts in optimizing oil production at the Galoc Field from the current four (4) production wells in order to sustain profitability and prolong the field's economic life.
The Consortium submitted to the DOE a budget of US$ 44,500 for 2018, of which 75% is allotted for floating production storage and offloading (FPSO) related costs and the rest for field operations and management costs. A total of four (4) liftings is also forecasted for 2018, with cargo volume of between 325,000 and 330,000 barrels.
The Galoc field has produced about 20.18 million barrels of oil since start of production in October
2008
(a)
|
Service Contract 14 Block A Nido, Block B Matinloc, and Block B1 North Matinloc
|
Service Contract 14 Block A Nido, Block B Matinloc, and Block B1 North Matinloc are located offshore northwest Palawan. Block A Nido has an area of 23.8 square kilometers and contains the Nido Production Area which was first put in production in 1979. Block B has an area of 154 square kilometers and contains the Matinloc Oil Production Complex which was first put in production in 1982. Block B1 has an area of 8 square kilometers and contains the North Matinloc field which was first put in production in 1989. Forum Energy's participating interest in Block A, Block B, and Block B1 is 8.46%, 12.40%, and 19.46%, respectively. The Nido and Matinloc fields are in late-life and cyclical production, meaning intermittent production to allow time for oil to accumulate on top of the reservoir. Aside from production performance of the wells, continued production from Nido and Matinloc is dependent on oil price due to the relatively high operating cost and the ability to share operating expenses.
Service Contract 40 North Cebu
Forum Energy has a 66.67% participating interest in Service Contract 40 ("SC40") which covers the northern area of Cebu Island and the adjacent offshore areas in the Central Tañon Strait and Visayan Sea, with a total area of 4,580 square kilometers. On January 30, 2009, Forum entered into a Gas Sale & Purchase Agreement with Desco, Inc., for the development of the Libertad gas field for power generation. On February 6, 2012, commercial production at the Libertad gas field commenced. The total production from the Libertad Field in 2014 was 41 million cubic feet of gas (79 million cubic feet of gas in 2013), the reduced production was due to a prolonged shutdown caused by engine problems. However these revenues of US$62,000 (2013 - US$ 115,000), were not considered to be material to Forum Energy's cash flow.
As at 31 December 2016, the field had produced 208.9 million cubic feet of gas. The production was shut since August 2015 due to rapid decrease in pressure. A plug and abandonment (P & A) program for the Libertad 95-1 well was being prepared in coordination with Desco Inc. The P & A was implemented in 2017. Other sub-blocks within SC 40 will continue to be explored.
Lascogon Mining Corporation ("Lascogon")
As of June 30, 2018, the Company held 1.08% interest in Lascogon, which is a party to Mineral Production Sharing Agreement No. 148 with the Government of the Philippines ("MPSA 148") which covers an area of 2,306 hectares (the "Lascogon Project").
The current mining exploration phase of MPSA 148 expired in January 2014 and, whilst a challenge regarding the cancellation of the MPSA is underway, it remains uncertain whether a further two year extension will be granted.
Metalore Mining Corporation ("Metalore")
The Company continues to hold shares of the project joint venture company, Metalore, but the Company has effectively abandoned the property that was previously held by the joint venture company.
Financial
Management considers that the current economic environment is difficult and the outlook for oil and gas exploration companies presents significant challenges in terms of raising funds through issuance of shares. To the extent necessary, the Company has relied on its ability to raise funds via dispositions of quantities of its shareholdings in Forum Energy to PXP under terms that are consistent with the best interests of shareholders, in order to finance its operations. The Company has been successful in disposing quantities of its shareholdings in Forum Energy in previous fiscal years. However, there can be no assurance the Company will continue to be able to dispose of quantities of its shares in Forum Energy under suitable terms. In addition, management has instituted measures to preserve cash through significantly decreasing its corporate costs.
Selected Annual Information
|
|
Year Ended
12/31/17
|
|
|
Year Ended
12/31/16
|
|
|
Year Ended
12/31/15
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Net income (loss)
|
|
$
|
1,803,036
|
|
|
$
|
(249,569
|
)
|
|
$
|
340,909
|
|
Basic and Diluted Income (Loss) per share
|
|
$
|
(0.00)/(0.0
|
))
|
|
$
|
(0.00)/(0.0
|
))
|
|
$
|
(0.00)/(0.0
|
))
|
Dividends per share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Weighted Avg. Shares O/S ('000)
|
|
|
409,143,765
|
|
|
|
411,274,913
|
|
|
|
439,143,765
|
|
Working Capital
|
|
$
|
399,308
|
|
|
$
|
261,094
|
|
|
$
|
510,407
|
|
Long-Term Debt
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Shareholders' Equity/(Deficiency)
|
|
$
|
2,064,726
|
|
|
$
|
261,690
|
|
|
$
|
511,259
|
|
Total Assets
|
|
$
|
2,098,671
|
|
|
$
|
320,326
|
|
|
$
|
572,218
|
|
Results of Operations
The accounts show a loss for the quarter ended June 30, 2018
of $(95,440) or $0.00
per share, versus income of $1,887,157 for the same period in 2017. The difference was because of the $1,965,000 unrealized gain on the reclassification of FEP shares as a result of the loss of significant influence. Prior to the dilution, the Company accounted for its investment in FEP using the equity method; following the loss of significant influence this investment is now classified as available for sale and is measured at fair value.
General and Administration expense were $97,846 for the quarter ended June 30, 2018 versus $78,534 for the same period in 2017. Overall expenses were marginally higher than those experienced in the previous year due to an increase in professional fees and listing and filing fees. For the quarter ended June 30, 2018 foreign exchange loss was $324 versus a loss of $2,073 for the quarter ended June 30, 2017.
The Company's current assets were $345,183 at June 30, 2018 versus $433,253 for the year ended December 31, 2017. The difference is mainly a result of the higher cash balance on December 31, 2017. The Company's assets reflect the value of Forum Energy on a fair value basis and Lascogon on an equity basis. The investment in Lascogon is reflected at a carrying value of $Nil in the financial statements as at June 30, 2018 and December 31, 2017. The fair value of the investment in FEP is reflected at $1,665,000 or US$0.30 per share based on the most recent arms' length financing completed in FEP.
PROPERTY, PLANT AND EQUIPMENT
Computer Equipment
|
|
June 30, 2018
|
|
Cost
|
|
|
|
Opening Cost
|
|
$
|
15,543
|
|
Additions
|
|
|
-
|
|
Ending Cost
|
|
|
15,543
|
|
|
|
|
|
|
Accumulated Depreciation
|
|
|
|
|
Opening Accumulated Depreciation
|
|
$
|
(15,125
|
)
|
Charge for the quarter
|
|
|
(63
|
)
|
Ending Accumulated Depreciation
|
|
|
(15,188
|
)
|
|
|
|
|
|
Carrying Value
|
|
$
|
355
|
|
Summary of Quarterly Results
Selected Financial Data
(in '000, except EPS)
|
1st
Qtr 18
|
1st
Qtr 18
|
4th
Qtr 17
|
3rd
Qtr 17
|
2nd
Qtr 17
|
1st
Qtr 17
|
4th
Qtr 16
|
3rd
Qtr 16
|
(Loss) Income
|
(53)
|
(43)
|
(53)
|
(31)
|
(37)
|
1,924
|
(100)
|
(60)
|
Basic and Diluted Loss per share
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.01
|
(0.00)
|
(0.00)
|
In the 1
st
quarter of 2017 the Company recorded an unrealized gain of $1,965,000 on the reclassification of its investment in FEP.