Liquidity and Capital Resources
At September 30, 2011 and December 31, 2010, total assets were $23,023 and $30,957, respectively. We had cash of $6,223 and $6,394 at September 30, 2011 and December 31, 2010, respectively, and a related party receivable of $24,563 at December 31, 2010. At September 30, 2011, long-term assets consisted of oil & gas properties - unproved of $16,800.
Brenham became a separate public company through a spin-off transaction to holders of common stock of American. Brenham is offering to purchase all of the spin-off shares in the spin-off distribution at the rescission offer purchase price. In connection with the Rescission Offer, the Company was subject to a liability of $12,335 plus accrued interest at a rate of five (5%) percent per annum from July 21, 2010 through July 22, 2011, the expiration date of the Rescission Offer. Less than $100 has been paid to shareholders in connection with the Rescission Offer and the Company is no longer subject to this liability.
At September 30, 2011, total liabilities were $110,411, consisting of $36,996 in accounts payable, $65,015 in accounts payable to related parties, and $8,400 in contingent consideration.
We had negative cash flow from operations of $44,023 during nine months ended September 30, 2011 as a result of a net loss of $128,360, offset by stock-based compensation of $35,700, other non-cash compensation of $19,880, and an increase in accounts payable and accounts payable to related parties of $23,962 and $4,795, respectively. We had negative cash flow from operations of $66,826 during nine months ended September 30, 2010 as a result of a net loss of $137,083, offset by stock-based compensation of $45,466, an increase in accounts payable of $21,335, and an in increase in accounts payable to related parties of $3,456.
Cash provided by investing activities for nine months ended September 30, 2011 was $61,447, consisting of net collections from related parties. Cash provided by investing activities for nine months ended September 30, 2010 was $26,375, consisting of net collections from related parties.
For nine months ended September 30, 2011, cash used in financing activities was $17,595, consisting of $17,500 for the repayment of related party advances and $95 for the repurchase of 142,741 shares of Brenham's common stock for treasury. For nine months ended September 30, 2010, cash provided by financing activities was $39,600, consisting of proceeds from the sale of common stock of $22,100 and proceeds from related party advances of $17,500.
As a result of our limited cash resources, our executive officers have not received any cash compensation since inception through the current date. However, the Company issued restricted shares of common stock to its President and Chief Financial Officer for services rendered as executive officers. We have not had any discussions nor do we have any plans for future cash compensation arrangements. If and when we experience a positive cash flow from operations and have sufficient cash reserves to fund our plan of operation, if ever, we may consider compensating our executive officers. We will continue to evaluate our financial condition and our liquidity and capital resources prior to entering into any compensation arrangements with our executive officers.
We are an exploration stage company and will continue to be so until commencement of substantial production from our future oil and gas properties, none of which have been identified to date. Future revenue will depend upon successful selection of future prospects, drilling results, additional and timely capital funding at terms and conditions satisfactory to us, of which there can be no assurance, and access to suitable infrastructure. Further, we will not be able to commence our exploration program until we have entered into certain agreements with government agencies of respective countries and/or other oil and gas companies. Until then our primary sources of liquidity are expected to be net proceeds from future offerings and funds from future private and public equity placements and debt funding.
In July 2011, we purchased an oil field with 20 oil wells situated on approximately 700 acres in the Permian Basin near Abilene, Texas. We issued 2,000,000 shares of common stock with an additional 2,000,000 shares to be issued contingent upon realization of certain production targets in 2012. The oil field contains estimated probable reserves of approximately 1.4 million barrels of oil (net to the company). The net present value (10% discount rate after development and operating costs) is approximately $20 million. We estimate the capital costs for development to be about $3 million over the next few years.
We expect to incur substantial expenses and generate significant operating losses as we pursue our efforts to identify prospects, develop those prospects and as we:
purchase and analyze seismic data in order to identify future prospects;
opportunistically invest in additional oil and gas leases and concession licenses;
develop our discoveries which we determine to be commercially viable; and
incur expenses related to operating as a public company and compliance with regulatory requirements.
Our future financial condition and liquidity will be impacted by, among other factors, the success of selection of potential prospects, our future exploration and appraisal drilling program, the number of commercially viable oil and gas discoveries made and the quantities of oil and gas discovered, the speed with which we can bring such discoveries to production, and the actual cost of exploration, appraisal and development of our prospects.
Until such time as we can identify specific potential prospects, we cannot determine with any certainty the amount of capital that we will be required to raise to fund each potential prospect. To date, we have not begun negotiations with any investment bank, financial institution or other source of funding for the purpose of raising either equity or debt capital, nor have we negotiated with any potential joint venture partner for the purpose of pursuing any potential prospect. Only when and if we identify potential prospects and seek to enter into contracts, licenses or other arrangements to pursue such prospects will we be able to determine the amount of funding that will be required for each such prospect. We have no arrangements with our executive officers or principal shareholders to provide any funding and any funding that they may be requested to provide may be limited.
Additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our shareholders. For example, if we raise additional funds by issuing additional equity securities, further dilution to our existing shareholders will result. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our exploration and appraisal drilling programs. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our prospects which we would otherwise develop on our own, or with a majority working interest.
In the future, we may be party to the following contractual arrangements, which will subject us to further contractual obligations:
contracts for the lease of drilling rigs;
contracts for the provision of production facilities;
infrastructure construction contracts; and
long term oil and gas property lease arrangements.
Off-Balance Sheet Arrangements
As of September 30, 2011 and December 31, 2010 we did not have any off-balance sheet arrangements.