Oilsands Quest Files 10-Q Quarterly Report

Oilsands Quest has announced that its Form 10-Q Quarterly Report for the period ended October 31, 2009.

Liquidity and Capital Resources

At October 31, 2009, the Company held cash and short term investments totaling $46.3 million (April 30, 2009 - $32.2 million).

On May 12, 2009, the Company issued 35,075,000 units at $0.85 per unit for gross proceeds of $29.8 million. The units were issued as part of a public offering and were comprised of a share of the common stock and one-half of a warrant to purchase a share of common stock. The Company paid an aggregate of $1.5 million in fees to a syndicate of agents under the terms of the agency agreement and $1.2 million of legal fees and other expenses in relation to the offering.

During the six months ended October 31, 2009, the Company expended $13.3 million on operations and $1.7 million on property and equipment.

We believe that we have sufficient funds to carry out our planned activities over the next twelve months. If we accelerate commercial development at Axe Lake or any of our other prospects, our cash requirements will increase significantly. Additional funding may also be required if our current planned activities are changed in scope or if actual costs differ from estimates of current plans. We believe the Company will have access to sufficient funding and sources of capital for its planned activities through to October 31, 2010. Because we constantly and actively monitor our expenditure budgets, if sufficient funding is not available we can adjust our expenditure plans based on available cash. We plan to fund future operations by way of financing, including a public offering or private placement of equity or debt securities. Our development strategy also includes considering partners on a joint venture basis on our specific projects to fund the development of such projects in a timely and responsible manner. However, there is no assurance that debt or equity financing or joint venture partner arrangements will be available to us on acceptable terms, if at all, to meet these requirements. The Company has no revenues, and its operating results, profitability and the future rate of growth depend solely on management's ability to successfully implement the business plans and on the ability to raise further funding.

Results of Operations

Net loss

Three Months ended October 31, 2009 as compared to three months ended October 31, 2008. The Company experienced a net loss of $13.2 million or $0.04 per share for the three months ended October 31, 2009 as compared to a net loss of $42.9 million or $0.17 per share for the three months ended October 31, 2008. The decline in the net loss is due to a reduction in exploration activity and stock-based compensation expense as compared to the same quarter last year.

Six Months ended October 31, 2009 as compared to six months ended October 31, 2008. The Company experienced a net loss of $18.0 million or $0.06 per share for the six months ended October 31, 2009 as compared to a net loss of $57.2 million or $0.22 per share for the six months ended October 31, 2008. The decline in the net loss is mainly due to the reduction in exploration activity and stock-based compensation expense as compared to the same period last year.

The Company expects to continue to incur operating losses and will continue to be dependent on additional sales of equity or debt securities and/or property joint ventures to fund its activities in the future.

Exploration costs

Three and six months October 31, 2009 as compared to three and six months ended October 31, 2008. Exploration costs for the three months ended October 31, 2009 were $8.8 million (2008 - $37.3 million). Exploration costs for the six months ended October 31, 2009 were $12.4 million (2008 - $47.7 million). The Operations Summary above provides a summary of the exploration activities conducted in the three and six months ended October 31, 2009. Exploration expenditures in the three and six months ended October 31, 2008 related mainly to drilling, seismic, engineering, environmental and construction costs associated with Test Sites 1 & 3.
 

Interest and other income

Three and six months ended October 31, 2009 as compared to three and six months ended October 31, 2008. Interest income for the three months ended October 31, 2009 was $0.01 million (2008 - $0.4 million). Interest income for the six months ended October 31, 2009 was $0.1 million (2008 - $0.8 million). Interest income is earned because the Company pre-funds its activities and the resulting cash on hand which is invested in short-term deposits. The decrease in interest income this period as compared to the same period in the prior year reflects the decrease in short term investments and the decrease in market interest rates over the intervening year.

Deferred income tax benefit

Three and six months ended October 31, 2009 as compared to three and six months ended October 31, 2008. The deferred income tax benefit for the three months ended October 31, 2009 was $0.7 million (2008 - $10.8 million). The deferred income tax benefit for the six months ended October 31, 2009 was $2.2 million (2008 - $14.2 million). The decrease in the deferred tax benefit during the three and six month periods ended October 31, 2009 compared to the same periods last year is mainly due to a reduction in exploration costs incurred.

The Company has generated deferred tax benefits by expensing all exploration costs for accounting purposes while capitalizing these costs for income tax purposes. This results in a higher tax basis for the Company's property and equipment when compared to their carrying value. The deferred tax liability reported on the balance sheet is mainly related to the book value of property which will not be deductible for tax purposes and is related to the Company's 2006 acquisition of the minority interest in OQI Sask.

 

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