Nevada
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75-2399477
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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1603 LBJ Freeway
Suite 300
Dallas, Texas
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(Address of principal executive offices)
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75234
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(Zip Code)
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(972) 407-8400
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(Registrant’s telephone number, including area code)
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Large accelerated filer £
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Accelerated filer £
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Non-accelerated filer £
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Smaller reporting company R
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Yes: £No: R
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Common Stock, $.01 par value
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1,946,935 shares
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(Class)
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(Outstanding at August 9, 2013)
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PART I: FINANCIAL INFORMATION
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Item 1. Financial Statements
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3
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Consolidated Balance Sheets
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3
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Consolidated Statements of Operations
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5
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Consolidated Statements of Cash Flows
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6
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Notes To Consolidated Financial Statements
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7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
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11
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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14
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Item 4. Controls and Procedures
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14
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PART II: OTHER INFORMATION
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15
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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15
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Item 6. Exhibits
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16
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Signatures
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17
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NEW CONCEPT ENERGY, INC. AND SUBSIDARIES
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||||||||
CONSOLIDATED BALANCE SHEETS
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||||||||
(unaudited)
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||||||||
(amounts in thousands)
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||||||||
June 30,
2013
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December 31,
2012
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|||||||
Assets
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||||||||
Current assets
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||||||||
Cash and cash equivalents
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$ | 960 | $ | 398 | ||||
Accounts receivable from oil and gas sales
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236 | 210 | ||||||
Other current assets
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6 | 2 | ||||||
Total current assets
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1,202 | 610 | ||||||
Oil and natural gas properties (full cost accounting method)
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||||||||
Proved developed and undeveloped oil and gas properties, net of depletion
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9,432 | 9,717 | ||||||
Property and equipment, net of depreciation
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||||||||
Land, buildings and equipment - oil and gas operations
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1,461 | 1,410 | ||||||
Other
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193 | 204 | ||||||
Total property and equipment
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1,654 | 1,614 | ||||||
Other assets (including $119,625 and $161,300 due from related parties
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||||||||
in 2013 and 2012
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576 | 543 | ||||||
Total assets
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$ | 12,864 | $ | 12,484 |
The accompanying notes are an integral part of these consolidated financial statements.
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NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES
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||||||||
CONSOLIDATED BALANCE SHEETS - CONTINUED
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||||||||
(unaudited)
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||||||||
(amounts in thousands, except share amounts)
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||||||||
June 30,
2013
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December 31,
2012
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|||||||
Liabilities and stockholders' equity
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|||||||
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Current liabilities
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Accounts payable - trade
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$ | 137 | $ | 38 | ||||
Accrued expenses
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232 | 173 | ||||||
Current portion of long term debt
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48 | 93 | ||||||
Total current liabilities
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417 | 304 | ||||||
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||||||||
Long-term debt
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||||||||
Notes payable less current portion
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2,321 | 2,273 | ||||||
Asset retirement obligation
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2,770 | 2,770 | ||||||
Other long-term liabilities
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541 | 491 | ||||||
Total liabilities
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6,049 | 5,838 | ||||||
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||||||||
Stockholders' equity
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||||||||
Preferred stock, Series B
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1 | 1 | ||||||
Common stock, $.01 par value; authorized, 100,000,000
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||||||||
shares; issued and outstanding, 1,946,935 shares
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||||||||
at June 30, 2013 and December 31, 2012
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20 | 20 | ||||||
Additional paid-in capital
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58,838 | 58,838 | ||||||
Accumulated deficit
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(52,044 | ) | (52,213 | ) | ||||
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||||||||
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6,815 | 6,646 | ||||||
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||||||||
Total liabilities & equity
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$ | 12,864 | $ | 12,484 | ||||
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||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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NEW CONCEPT ENERGY, INC AND SUBSIDIARIES
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||||||||||||||||
CONSOLIDATED STATEMENT OF OPERATIONS
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||||||||||||||||
(unaudited)
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||||||||||||||||
(amounts in thousands, except per share data)
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||||||||||||||||
For the Three Months
ended June 30,
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For the Six Months
ended June 30,
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|||||||||||||||
2013
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2012
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2013
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2012
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|||||||||||||
Revenue
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|
|
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|||||||||||||
Oil and gas operations, net of royalties
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$ | 384 | $ | 325 | $ | 724 | $ | 615 | ||||||||
Real estate operations
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666 | 663 | 1,346 | 1,337 | ||||||||||||
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1,050 | 988 | 2,070 | 1,952 | ||||||||||||
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||||||||||||||||
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||||||||||||||||
Operating expenses
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||||||||||||||||
Oil and gas operations
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493 | 453 | 949 | 924 | ||||||||||||
Real estate operations
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383 | 353 | 769 | 719 | ||||||||||||
Lease expense
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236 | 231 | 472 | 462 | ||||||||||||
Corporate general and administrative
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170 | 134 | 343 | 293 | ||||||||||||
Accretion of asset retirement obligation
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- | 34 | - | 68 | ||||||||||||
Impairment of natural gas and oil properties
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- | - | - | 912 | ||||||||||||
1,282 | 1,205 | 2,533 | 3,378 | |||||||||||||
Operating earnings (loss)
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(232 | ) | (217 | ) | (463 | ) | (1,426 | ) | ||||||||
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Other income (expense)
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||||||||||||||||
Interest income
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2 | - | 8 | - | ||||||||||||
Interest expense
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(24 | ) | (56 | ) | (73 | ) | (118 | ) | ||||||||
Recovery of bad debt expense
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394 | - | 733 | - | ||||||||||||
Other income (expense), net
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(2 | ) | 104 | (36 | ) | 108 | ||||||||||
Other income (expense)
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370 | 48 | 632 | (10 | ) | |||||||||||
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||||||||||||||||
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$ | 138 | $ | (169 | ) | $ | 169 | $ | (1,436 | ) | ||||||
Net income (loss) applicable to common shares
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||||||||||||||||
$ | 0.07 | $ | (0.09 | ) | $ | 0.09 | $ | (0.74 | ) | |||||||
Net income (loss) per common share-basic and diluted
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||||||||||||||||
Weighted average common and equivalent shares outstanding - basic
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1,947 | 1,947 | 1,947 | 1,947 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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NEW CONCEPT ENERGY, INC AND SUBSIDIARIES
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||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
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||||||||
(unaudited)
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||||||||
(amounts in thousands)
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||||||||
For the Six Months
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||||||||
Ended | ||||||||
June 30,
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||||||||
2013
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2012
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|||||||
Cash flows from operating activities
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|||||||
Net income
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$ | 169 | $ | (1,436 | ) | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities
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||||||||
Depreciation, depletion and amortization
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431 | 377 | ||||||
Accretion of asset retirement obligation
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- | 128 | ||||||
Changes in operating assets and liabilities
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||||||||
Other current and non-current assets
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(76 | ) | (251 | ) | ||||
Accounts payable and other liabilities
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208 | 273 | ||||||
Impairment of oil and gas properties
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- | 912 | ||||||
Net cash provided by (used) in operating activities
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732 | 3 | ||||||
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Cash flows from investing activities
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Investment in oil and gas
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(57 | ) | - | |||||
Fixed asset additions
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(112 | ) | (32 | ) | ||||
Net cash provided by (used in) investing activities
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(169 | ) | (32 | ) | ||||
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Cash flows from financing activities
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||||||||
Proceeds from loans
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16 | 42 | ||||||
Payment on notes payable
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(17 | ) | (22 | ) | ||||
Net cash provided by (used in) financing activities
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(1 | ) | 20 | |||||
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||||||||
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||||||||
Net increase (decrease) in cash and cash equivalents
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562 | (9 | ) | |||||
Cash and cash equivalents at beginning of year
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398 | 109 | ||||||
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Cash and cash equivalents at end of year
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$ | 960 | $ | 100 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
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Three months ended June 30, 2013
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Oil and Gas
Operations
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Retirement
Facility
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Corporate
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Total
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||||||||||||
Operating revenue
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$ | 384 | $ | 666 | $ | - | $ | 1,050 | ||||||||
Operating expenses
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313 | 368 | 170 | 851 | ||||||||||||
Depreciation, Depletion and Amortization
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180 | 15 | - | 195 | ||||||||||||
Lease Expense
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- | 236 | - | 236 | ||||||||||||
Total Operating Expenses
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493 | 619 | 170 | 1,282 | ||||||||||||
Interest Income
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- | - | 2 | 2 | ||||||||||||
Interest expense
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(24 | ) | - | - | (24 | ) | ||||||||||
Recovery of Bad Debt Expense
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- | - | 394 | 394 | ||||||||||||
Other income
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49 | - | (51 | ) | (2 | ) | ||||||||||
Segment operating income
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$ | (84 | ) | $ | 47 | $ | 175 | $ | 138 | |||||||
Three months ended June 30, 2012
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Oil and Gas
Operations
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Retirement
Facility
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Corporate
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Total
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||||||||||||
Operating revenue
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$ | 325 | $ | 663 | $ | - | $ | 988 | ||||||||
Operating expenses
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296 | 341 | 134 | 771 | ||||||||||||
Depreciation, Depletion and Amortization
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157 | 12 | - | 169 | ||||||||||||
Lease Expense
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- | 231 | - | 231 | ||||||||||||
Accretion of Asset Retirement Obligation
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34 | - | - | 34 | ||||||||||||
Total Operating Expenses
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487 | 584 | 134 | 1,205 | ||||||||||||
Interest expense
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(56 | ) | - | - | (56 | ) | ||||||||||
Other income
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- | - | 104 | 104 | ||||||||||||
Segment operating income
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$ | (218 | ) | $ | 79 | $ | (30 | ) | $ | (169 | ) |
Six months ended June 30, 2013
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Oil and Gas
Operations
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Retirement
Facility
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Corporate
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Total
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||||||||||||
Operating revenue
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$ | 724 | $ | 1,346 | $ | - | $ | 2,070 | ||||||||
Operating expenses
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566 | 739 | 343 | 1,648 | ||||||||||||
Depreciation, Depletion and Amortization
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383 | 30 | - | 413 | ||||||||||||
Lease Expense
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- | 472 | - | 472 | ||||||||||||
Total Operating Expenses
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949 | 1,241 | 343 | 2,533 | ||||||||||||
Interest Income
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- | - | 8 | 8 | ||||||||||||
Interest expense
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(73 | ) | - | - | (73 | ) | ||||||||||
Recovery of Bad Debt Expense
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- | - | 733 | 733 | ||||||||||||
Other income
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- | - | (36 | ) | (36 | ) | ||||||||||
Segment operating income
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$ | (298 | ) | $ | 105 | $ | 362 | $ | 169 | |||||||
Six months ended June 30, 2012
|
Oil and Gas
Operations
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Retirement
Facility
|
Corporate
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Total
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||||||||||||
Operating revenue
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$ | 615 | $ | 1,337 | $ | - | $ | 1,952 | ||||||||
Operating expenses
|
586 | 696 | 293 | 1,575 | ||||||||||||
Depreciation, Depletion and Amortization
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338 | 23 | - | 361 | ||||||||||||
Lease Expense
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- | 462 | - | 462 | ||||||||||||
Accretion of Asset Retirement Obligation
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68 | - | - | 68 | ||||||||||||
Impairment of Natural Gas and Oil Properties
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912 | - | - | 912 | ||||||||||||
Total Operating Expenses
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1904 | 1,181 | 293 | 3,378 | ||||||||||||
Interest expense
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(118 | ) | - | - | (118 | ) | ||||||||||
Other income
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- | - | 108 | 108 | ||||||||||||
Segment operating income
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$ | (1,407 | ) | $ | 156 | $ | (185 | ) | $ | (1,436 | ) |
Exhibit Designation
|
Exhibit Description
|
3.1
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Articles of Incorporation of Medical Resource Companies of America (incorporated by reference to Exhibit 3.1 to Registrant’s Form S-4 Registration Statement No. 333-55968 dated December 21, 1992)
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3.2
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Amendment to the Articles of Incorporation of Medical Resource Companies of America (incorporated by reference to Exhibit 3.5 to Registrant’s Form 8-K dated April 1, 1993)
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3.3
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Restated Articles of Incorporation of Greenbriar Corporation (incorporated by reference to Exhibit 3.1.1 to Registrant’s Form 10-K dated December 31, 1995)
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3.4
|
Amendment to the Articles of Incorporation of Medical Resource Companies of America (incorporated by reference to Exhibit to Registrant’s PRES 14-C dated February 27, 1996)
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3.5
|
Bylaws of Registrant (incorporated by reference to Exhibit 3.2 to Registrant’s Form S-4 Registration Statement No. 333-55968 dated December 21, 1992)
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3.6
|
Amendment to Section 3.1 of Bylaws of Registrant adopted October 9, 2003 (incorporated by reference to Exhibit 3.2.1 to Registrant’s Form S-4 Registration Statement No. 333-55968 dated December 21, 1992)
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3.7
|
Certificate of Decrease in Authorized and Issued Shares effective November 30, 2001 (incorporated by reference to Exhibit 2.1.7 to Registrant’s Form 10-K dated December 31, 2002)
|
3.8
|
Certificate of Designations, Preferences and Rights of Preferred Stock dated May 7, 1993 relating to Registrant’s Series B Preferred Stock (incorporated by reference to Exhibit 4.1.2 to Registrant’s Form S-3 Registration Statement No. 333-64840 dated June 22, 1993)
|
3.9
|
Certificate of Voting Powers, Designations, Preferences and Rights of Registrant’s Series F Senior Convertible Preferred Stock dated December 31, 1997 (incorporated by reference to Exhibit 2.2.2 of Registrant’s Form 10-KSB for the fiscal year ended December 31, 1997)
|
3.10
|
Certificate of Voting Powers, Designations, Preferences and Rights of Registrant’s Series G Senior Non-Voting Convertible Preferred Stock dated December 31, 1997 (incorporated by reference to Exhibit 2.2.3 of Registrant’s Form 10-KSB for the fiscal year ended December 31, 1997)
|
3.11
|
Certificate of Designations dated October 12, 2004 as filed with the Secretary of State of Nevada on October 13, 2004 (incorporated by reference to Exhibit 3.4 of Registrant’s Current Report on Form 8-K for event occurring October 12, 2004)
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3.12
|
Certificate of Amendment to Articles of Incorporation effective February 8, 2005 (incorporated by reference to Exhibit 3.5 of Registrant’s Current Report on Form 8-K for event occurring February 8, 2005)
|
3.13
|
Certificate of Amendment to Articles of Incorporation effective March 21, 2007 (incorporated by reference to Exhibit 3.13 of Registrant’s Current Report on Form 8-K for event occurring March 21, 2005)
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31.1*
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Certification pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended, of Principal Executive Officer and Chief Financial Officer
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32.1*
|
Certification of Principal Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T.
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*Filed herewith.
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New Concept Energy, Inc.
|
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Date: August 12, 2013
|
By:
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/s/ Gene Bertcher
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|
Gene S. Bertcher, Principal Executive
|
|||
Officer, President and Chief Financial
|
|||
Officer
|
CERTIFICATIONS | EXHIBIT 31.1 |
Dated: August 12, 2013
|
/s/ Gene S. Bertcher
Gene S. Bertcher, Principal Executive
Officer, President and Chief Financial Officer
|
Dated: August 12, 2013
|
/s/ Gene S. Bertcher
Gene S. Bertcher, Principal Executive
Officer, President and Chief Financial Officer
|
Segmant report Information for Three months ended June 30, 2013 (Details) (USD $)
|
Oil and Gas Operations
|
Retirement Facility
|
Corporate segment
|
Total segments
|
---|---|---|---|---|
Operating Segments balance at Mar. 31, 2013 | $ 0 | |||
Segment Operating revenue | 384 | 666 | 1,050 | |
Segment Operating expenses | 313 | 368 | 170 | 851 |
Segment Depreciation, Depletion and Amortization | 180 | 15 | 195 | |
Segment lease expense | 236 | 236 | ||
Segment Total Operating Expenses | 493 | 619 | 170 | 1,282 |
Segment Interest Income | 2 | 2 | ||
Segment Interest expense | (24) | (24) | ||
Segment Recovery of Bad Debt Expense | 394 | 394 | ||
Segment Other income | 49 | (51) | (2) | |
Segment operating income | (84) | 47 | 175 | 138 |
OperatingSegmentsBalance1 at Jun. 30, 2013 | 0 | |||
Operating Segments balance at Jun. 30, 2013 | $ 0 |
CONTINGENCIES
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Commitment and Contingencies | |
Contingencies Disclosure | NOTE E: CONTINGENCIES Carlton Energy Group, LLC In December 2006, Carlton Energy Group, LLC (Carlton) instituted litigation against an individual, Eurenergy Resources Corporation (Eurenergy) and several other entities including New Concept Energy, Inc., which was then known as CabelTel International Corporation (the Company) alleging tortuous conduct, breach of contract and other matters and as to the Company that it was the alter ego of Eurenergy. The Carlton claims were based upon an alleged tortuous interference with a contract by the individual and Eurenergy related to the right to explore a coal bed methane concession in Bulgaria which had never (and has not to this day) produced any hydrocarbons. At no time during the pendency of this project or since did the company or any of its officers or directors have any interest whatsoever in the success or failure of the so-called Bulgaria Project. However, in the litigation, Carlton alleged that the Company was the alter-ego of certain of the other Defendants including Eurenergy. Following a jury trial in 2009, the Trial Court (295th District Court of Harris County, Texas) reduced the actual damages found by the jury of $66.5 million and entered judgment against EurEnergy and The individual jointly and severally for $31.16 million in actual damages on its tortuous-interference claim and the Court further assessed exemplary damages against The individual and EurEnergy in the amount of $8.5 million each. The Court granted a judgment for the Company that it was not the alter ego of any of the other parties and thereby would not incur any damages. Cross appeals were filed by Carlton, The individual and EurEnergy to the Court of Appeals for the First District of Texas (the Court of Appeals) which rendered its opinion on February 14, 2012. The Court of Appeals opinion, among other things, reinstated the jury award of actual damages jointly and severely against The individual and EurEnergy in the amount of $66.5 million and overturned the Trial Courts ruling favorable to the Company rendering a judgment for that amount plus exemplary damages against the Company as the alter ego of Eurenergy. The Company, and the other defendants, filed a Petition for Review of the Court of Appeals Opinion with the Supreme Court of the State of Texas. After requesting a response from the Plaintiff the Supreme Court requested full briefing on the merits. In March 2013 the Supreme Court granted the Petition for Review and the court is scheduled to hear oral arguments in September 2013. The Company vigorously denies that it is the alter ego of any other entity; further the Company strongly believes that the Court of Appeals opinion is erroneous in concluding that the Company is an alter ego of any other entity which is contrary to Nevada substantive law. There are also questions regarding the underlying liability of EurEnergy and if Eurenergy is successful in its petition for review or, even if unsuccessful if the Company is successful on its positions described above, the Trial Courts judgment could be reinstated and the Company would have no liability on this claim. Chesapeake Exploration Limited Partnership and Chesapeake Operating, Inc. (Chesapeake) In January 2006, the Company entered into a joint operating agreement evidencing its acquisition of a 5% interest in two gas wells being drilled and ultimately operated by Chesapeake. The Company relied on the cost projections provided by Chesapeake to make its investment decision. Subsequent to its investment, the Company received an invoice from Chesapeake for $556,217 which, according to Chesapeake, represents the Companys 5% share of additional costs incurred by Chesapeake in drilling the wells. The Company believes that these additional costs far exceed any reasonable expense that should have been incurred in drilling the two wells and were incurred without notifying the Company of such expenses. The Company has requested an accounting of the additional expenses and a reconciliation of the final costs to the cost estimates previously presented. In April 2007, Chesapeake filed a lawsuit against the Company and others in District Court of Tarrant County, Texas. In March 2011, Chesapeake received a summary judgment award including prejudgment interest for $686,874 plus $65,000 in legal fees. The judgment did however acknowledge that the plaintiff did not pay the company for its pro rata share of the gas produced by the two wells. The Company appealed the judgment to the Court of Appeals which reduced the judgment by approximately $16,000 but otherwise affirmed the lower court ruling. The company filed an appeal with the Texas Supreme Court however on February 15, 2013 the Supreme Court denied the petition. The Company is pursuing its legal remedies to offset the revenue for gas that has been previously produced and held by Chesapeake against the amount due Chesapeake. The Company has recorded a liability due Chesapeake which it believes is sufficient to provide for the net obligation to Chesapeake. Other The Company has been named as a defendant in other lawsuits in the ordinary course of business. Management is of the opinion that these lawsuits will not have a material effect on the financial condition, results of operations or cash flows of the Company. |
Segmant report Information for Three months ended June 30, 2012 (Details) (USD $)
|
Oil and Gas Operations
|
Retirement Facility
|
Corporate segment
|
Total segments
|
---|---|---|---|---|
Operating Segments balance at Mar. 31, 2012 | $ 0 | |||
Segment Operating revenue | 325 | 663 | 988 | |
Segment Operating expenses | 296 | 341 | 134 | 771 |
Segment Depreciation, Depletion and Amortization | 157 | 12 | 169 | |
Segment Lease Expense | 231 | 231 | ||
Accretion of Asset Retirement Obligation | 34 | 34 | ||
Segment Total Operating Expenses | 487 | 584 | 134 | 1,205 |
Segment Interest expense | (56) | (56) | ||
Segment Other income | 104 | 104 | ||
Segment operating income | (218) | 79 | (30) | (169) |
OperatingSegmentsBalance3 at Jun. 30, 2012 | $ 0 |
BASIS OF PRESENTATION
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
BASIS OF PRESENTATION | |
Basis of Presentation | NOTE A: BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements include the accounts of New Concept Energy, Inc. and its majority-owned subsidiaries (collectively, NCE or the Company). All significant intercompany transactions and accounts have been eliminated. The unaudited financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly present such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ending December 31, 2012. Operating results for the six month period ended June 30, 2013 are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December 31, 2013.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE C: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES We consider accounting policies related to our estimates of depreciation amortization and depletion, segments, oil and gas properties, oil and gas reserves, gas gathering assets, office and field equipment, revenue recognition and gas imbalances, leases, revenue recognition for real estate operations, impairment, and sales of real estate as significant accounting policies. The policies include significant estimates made by management using information available at the time the estimates are made. However, these estimates could change materially if different information or assumptions were used. These policies are summarized in our Annual Report on Form 10-K for the year ended December 31, 2012. |
OPERATING SEGMENTS
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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OPERATING SEGMENTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OPERATING SEGMENTS | NOTE F: OPERATING SEGMENTS The following table reconciles the segment information to the corresponding amounts in the Consolidated Statements of Operations and total assets:
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OIL AND GAS RESERVES
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6 Months Ended |
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Jun. 30, 2013
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Extractive Industries | |
OIL AND GAS RESERVES | NOTE D: OIL AND GAS RESERVES The Company uses the full cost method of accounting for its investment in oil and natural gas properties. Under this method of accounting, all costs of acquisition, exploration and development of oil and natural gas properties (including such costs as leasehold acquisition costs, geological expenditures, dry hole costs, tangible and intangible development costs and direct internal costs) are capitalized as the cost of oil and natural gas properties when incurred. The full cost method requires the Company to calculate quarterly, by cost center, a ceiling, or limitation on the amount of properties that can be capitalized on the balance sheet. To the extent capitalized costs of oil and natural gas properties, less accumulated depletion and related deferred taxes exceed the sum of the discounted future net revenues of proved oil and natural gas reserves, the lower of cost or estimated fair value of unproved properties subject to amortization, the cost of properties not being amortized, and the related tax amounts, such excess capitalized costs are charged to expense. The standardized measure of discounted future net cash flows and changes in such cash flows are prepared using assumptions required by the Financial Accounting Standards Board and the Securities and Exchange Commission. Such assumptions include a standardized method for determining pricing and require that future cash flow be discounted using a 10% rate. The valuation that results may not represent managements estimated current market value of proved reserves. During the past few years the exploration, development and production of natural gas has resulted in an oversupply of natural gas which has resulted in a substantial reduction in the market price. Management of the Company believes that this oversupply will last for some time and does not anticipate an increase in the price we can receive in the market place. In April 2012 the Company entering into an agreement to fix the price it receives for the sale of its gas. For the five years ended April 2017 the Company will receive $4.53 per MCF. While the lock-in price is higher than the current market price for natural gas when applying the new price using the formula mandated by the accounting rules the result was a reduction of $912,000 in value of the Companys recorded interests in its oil and gas properties. This reduction in value has been reflected in financial statements of the company as of June 30, 2013. |