10-Q 1 d10q.htm FORM 10-Q Prepared by R.R. Donnelley Financial -- Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
 
FORM 10-Q
 
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For Quarter ended June 30, 2002
 
Commission file number 0-5426
 
 
THE WISER OIL COMPANY
A DELAWARE CORPORATION
 
I.R.S. Employer Identification No. 55-0522128
 
8115 Preston Road, Suite 400
Dallas, Texas 75225
Telephone (214) 265-0080
 
Former name, former address and former fiscal year, if changed since last report.    NONE
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the close of the period covered by this report.
 
Class
     
Outstanding at June 30, 2002
$.01 par value
     
9,401,855
 

THE WISER OIL COMPANY
 
PART I
 
FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
The consolidated condensed 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 which are, in the opinion of management, necessary to fairly present such information. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including significant accounting policies, normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K.

2

THE WISER OIL COMPANY
 
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
    
June 30, 2002
     
December 31, 2001
  
    
(000’s) except share data
  
Assets
       
Current Assets:
                  
Cash and cash equivalents
   
$
2,050
 
   
$
12,659
 
Restricted cash
   
 
495
 
   
 
—  
 
Accounts receivable
   
 
15,132
 
   
 
14,281
 
Inventories
   
 
570
 
   
 
555
 
Fair value of derivatives
   
 
—  
 
   
 
1,346
 
Prepaid expenses
   
 
3,288
 
   
 
3,143
 
    
  
Total current assets
   
 
21,535
 
   
 
31,984
 
    
  
Property and Equipment, at cost:
                  
Oil and gas properties (successful efforts method)
   
 
377,785
 
   
 
343,623
 
Other properties
   
 
3,921
 
   
 
4,023
 
    
  
    
 
381,706
 
   
 
347,646
 
Accumulated depreciation, depletion and amortization
   
 
(139,024
)
   
 
(123,982
)
    
  
Net property and equipment
   
 
242,682
 
   
 
223,664
 
Other Assets
   
 
2,823
 
   
 
3,142
 
    
  
    
$
267,040
 
   
$
258,790
 
    
  
Liabilities and Stockholders’ Equity
                  
Current Liabilities:
                  
Accounts payable
   
$
22,226
 
   
$
11,685
 
Fair value of derivatives
   
 
5,737
 
   
 
946
 
Dividends payable
   
 
436
 
   
 
221
 
Accrued liabilities
   
 
7,053
 
   
 
6,655
 
    
  
Total current liabilities
   
 
35,452
 
   
 
19,507
 
    
  
Long-term Debt
   
 
151,960
 
   
 
143,463
 
Deferred Income Taxes
   
 
9,790
 
   
 
11,110
 
Stockholders’ Equity:
                  
Series C convertible preferred stock—$10 par value; 1,000,000 shares authorized; 1,000,000 shares issued and outstanding at $25 liquidation value per share
   
 
10,000
 
   
 
10,000
 
Common stock—$.01 par value; 30,000,000 shares authorized; shares issued – 9,625,959 at June 30, 2002 and 9,466,920 at December 31, 2001; shares outstanding – 9,401,855 at June 30, 2002 and 9,283,295 at December 31, 2001
   
 
95
 
   
 
94
 
Preferred stock discount, net of $4,782,000 and $2,410,000 amortization at June 30, 2002 and December 31, 2001, respectively
   
 
(5,224
)
   
 
(7,596
)
Paid-in capital
   
 
56,101
 
   
 
55,887
 
Retained earnings
   
 
17,108
 
   
 
37,899
 
Accumulated other comprehensive income
   
 
(5,279
)
   
 
(8,611
)
Treasury stock; 224,104 shares, at cost
   
 
(2,963
)
   
 
(2,963
)
    
  
Total stockholders’ equity
   
 
69,838
 
   
 
84,710
 
    
  
    
$
267,040
 
   
$
258,790
 
    
  
 
The notes to financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001 are an integral part of these financial statements.

3

THE WISER OIL COMPANY
 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
    
For the Three Months Ended June 30,
     
For the Six Months Ended June 30,
  
    
2002
     
2001
     
2002
     
2001
  
    
(000’s except per share data)
  
Revenues:
                                    
Oil and gas sales
   
$
19,364
 
   
$
20,407
 
   
$
33,721
 
   
$
44,236
 
Gain (loss) on sale of property
   
 
(26
)
   
 
8,296
 
   
 
494
 
   
 
8,296
 
Gain on derivatives
   
 
289
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
Interest and other income
   
 
(21
)
   
 
779
 
   
 
139
 
   
 
1,449
 
    
  
  
  
    
 
19,606
 
   
 
29,482
 
   
 
34,354
 
   
 
53,981
 
    
  
  
  
Costs and Expenses:
                                    
Production and operating
   
 
6,394
 
   
 
7,472
 
   
 
13,468
 
   
 
14,361
 
Depreciation, depletion and amortization
   
 
7,004
 
   
 
4,605
 
   
 
12,924
 
   
 
8,796
 
Loss on derivatives
   
 
—  
 
   
 
—  
 
   
 
7,321
 
   
 
—  
 
Exploration
   
 
5,870
 
   
 
1,657
 
   
 
7,960
 
   
 
3,904
 
General and administrative
   
 
2,534
 
   
 
2,006
 
   
 
4,969
 
   
 
3,924
 
Interest expense
   
 
3,527
 
   
 
3,322
 
   
 
7,038
 
   
 
6,480
 
    
  
  
  
    
 
25,329
 
   
 
19,062
 
   
 
53,680
 
   
 
37,465
 
    
  
  
  
Earnings (Loss) Before Income Taxes
   
 
(5,723
)
   
 
10,420
 
   
 
(19,326
)
   
 
16,516
 
Income Tax Benefit (Expense)
   
 
729
 
   
 
(189
)
   
 
1,774
 
   
 
(189
)
    
  
  
  
Net Income (Loss)
   
$
(4,994
)
   
$
10,231
 
   
$
(17,552
)
   
$
16,327
 
    
  
  
  
Earnings (Loss) Per Share:
                                    
Basic
   
$
(0.72
)
   
$
1.05
 
   
$
(2.24
)
   
$
1.69
 
    
  
  
  
Diluted
   
$
(0.72
)
   
$
0.75
 
   
$
(2.24
)
   
$
1.23
 
    
  
  
  
 
 
The notes to financial statements included in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2001 are an integral part of these financial statements.

4

THE WISER OIL COMPANY
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Six Months Ended June 30, 2002
 
    
Shares
     
Amount
  
    
(000’s)
  
Series C convertible preferred stock, $10 par value
                
Balance at beginning and end of period
   
1,000
 
   
$
10,000
 
    
  
Common stock, $0.01 par value:
                
Balance at beginning of period
   
9,467
 
   
 
94
 
Issuance of common stock
   
159
 
   
 
1
 
    
  
Balance at end of period
   
9,626
 
   
 
95
 
           
Preferred stock discount:
                
Balance at beginning of period
          
 
(7,596
)
Amortization of preferred stock discount
          
 
2,372
 
           
Balance at end of period
          
 
(5,224
)
           
Paid-in capital:
                
Balance at beginning of period
          
 
55,887
 
Issuance of common stock
          
 
214
 
           
Balance at end of period
          
 
56,101
 
           
Retained earnings:
                
Balance at beginning of period
          
 
37,899
 
Net loss
          
 
(17,552
)
Dividends on preferred stock
          
 
(867
)
Amortization of preferred stock discount
          
 
(2,372
)
           
Balance at end of period
          
 
17,108
 
           
Accumulated other comprehensive income:
                
Balance at beginning of period
          
 
(8,611
)
Foreign currency translation adjustment
          
 
4,062
 
Amortization of derivative fair value
          
 
(730
)
           
Balance at end of period
          
 
(5,279
)
           
Treasury stock:
                
Balance at beginning and end of period
   
(224
)
   
 
(2,963
)
    
  
Total Stockholders’ Equity
   
9,402
 
   
$
69,838
 
    
  
Net loss
          
$
(17,552
)
Foreign currency translation adjustment
          
 
4,062
 
Amortization of derivative fair value
          
 
(730
)
           
Comprehensive Loss
          
$
(14,220
)
           
 
The notes to financial statements included in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2001 are an integral part of these financial statements.

5

THE WISER OIL COMPANY
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    
For the Six Months Ended June 30,
  
    
2002
     
2001
  
    
(000’s)
  
Cash Flows From Operating Activities:
                  
Net Income (Loss)
   
 
(17,552
)
   
$
16,327
 
Adjustments to reconcile net income (loss) to operating cash flows:
                  
Depreciation, depletion and amortization
   
 
12,924
 
   
 
8,796
 
Deferred income tax benefit
   
 
(1,889
)
   
 
(90
)
Property sales gains
   
 
(494
)
   
 
(8,296
)
Property impairments and abandonments
   
 
2,702
 
   
 
1,660
 
Amortization of other assets
   
 
355
 
   
 
343
 
Amortization of other comprehensive income
   
 
(730
)
   
 
—  
 
Other Changes:
                  
Restricted cash
   
 
(495
)  
   
 
992
 
Accounts receivable
   
 
(851
)
   
 
1,308
 
Fair value of derivatives (receivable)
   
 
1,346
 
   
 
(319
)
Inventories
   
 
(15
)
   
 
(172
)
Prepaid expenses
   
 
(145
)
   
 
(781
)
Other assets
   
 
(18
)
   
 
(399
)
Accounts payable
   
 
10,541
 
   
 
(3,227
)
Fair value of derivatives (payable)
   
 
4,791
 
   
 
—  
 
Accrued liabilities
   
 
398
 
   
 
912
 
    
  
Operating Cash Flows
   
 
10,868
 
   
 
17,054
 
    
  
Cash Flows From Investing Activities:
                  
Capital expenditures
   
 
(30,883
)
   
 
(56,949
)
Proceeds from sales of property and equipment
   
 
2,259
 
   
 
—  
 
    
  
Investing Cash Flows
   
 
(28,624
)
   
 
(56,949
)
    
  
Cash Flows From Financing Activities:
                  
Increase in long-term debt
   
 
7,500
 
   
 
19,180
 
Preferred stock issued, net of issuance costs
   
 
—  
 
   
 
10,000
 
Preferred dividends
   
 
(437
)
   
 
—  
 
Common stock issued
   
 
—  
 
   
 
25
 
Warrants for common stock issued
   
 
—  
 
   
 
6
 
    
  
Financing Cash Flows
   
 
7,063
 
   
 
29,211
 
    
  
Effect of exchange rate changes on cash and cash equivalents
   
 
84
 
   
 
(731
)
    
  
Net Decrease in Cash and Cash Equivalents
   
 
(10,609
)
   
 
(11,415
)
Cash and Cash Equivalents, beginning of period
   
 
12,659
 
   
 
34,144
 
    
  
Cash and Cash Equivalents, end of period
   
$
2,050
 
   
$
22,729
 
    
  
 
The notes to financial statements included in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2001 are an integral part of these financial statements.

6

THE WISER OIL COMPANY
 
NOTES TO FINANCIAL STATEMENTS
 
Note 1.    Hedging Activities
 
As of August 13, 2002 the Company’s hedging arrangements were as follows:
 
Crude Oil:
   
Daily Volume
   
Price per Bbl
July 1, 2002 to December 31, 2002
   
1,000 Bbls
   
$21.95 swap
July 1, 2002 to September 30, 2002
   
1,000 Bbls
   
$23.00 swap
July 1, 2002 to September 30, 2002 (a)
   
1,000 Bbls
   
$22.00 swap
October 1, 2002 to March 31, 2003
   
1,000 Bbls
   
$25.12 swap
July 1, 2002 to December 31, 2002 (b)
   
400 Bbls
   
$8.30 differential swap
January 1, 2003 to March 31, 2003
   
2,000 Bbls
   
$29.00 call
Natural Gas:
   
Daily Volume
   
Price per MMBTU
July 1, 2002 to December 31, 2002
   
5,000 MMBTU
   
$3.00 swap
July 1, 2002 to December 31, 2002
   
7,500 MMBTU
   
$2.94 swap
July 1, 2002 to September 30, 2002 (a)
   
10,000 MMBTU
   
$3.135 swap
July 1, 2002 to September 30, 2002 (a)
   
10,000 MMBTU
   
$2.80 swap
October 1, 2002 to December 31, 2002 (c)
   
5,000 MMBTU
   
$3.15 floor, $4.00 ceiling
January 1, 2003 to December 31, 2003 (c)
   
10,000 MMBTU
   
$3.25 floor, $4.25 ceiling
(a)
 
This swap is extendable for three additional months at the same daily volume and price per mcf or bbl at the option of the counterparty.
(b)
 
Floating price—Wiser receives NYMEX less $8.30 per barrel; Wiser pays Bow River—Platts (heavy oil) price per barrel.
(c)
 
These are “collar” hedges whereby the Company contracts to receive the actual market price if the actual market price is between the floor price and the ceiling price. If the actual market price is below or above the floor or ceiling prices, the Company will receive the floor price or ceiling price, as applicable.
 
The Company continuously reevaluates its hedging program in light of market conditions, commodity price forecasts, capital spending and debt service requirements. If all of the extendable options are exercised by the counterparties, the Company will have hedged approximately 50% of its projected oil production and approximately 90% of its projected gas production for 2002.
 
None of the Company’s hedging activities at June 30, 2002 were designated as hedges under the terms of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activity. Changes in the fair value of these arrangements are recognized in the consolidated statement of income as derivative gain or loss. Monthly cash settlements of these hedges are not included in the consolidated statement of income. The derivative gain for the net change in fair value during the second quarter of 2002 was $289,000 and the derivative loss for the first six months of 2002 was $7,321,000. In addition, accumulated other comprehensive income at December 31, 2001 included $802,000 of deferred hedging gain that is being amortized to oil and gas revenues in 2002. In the second quarter of 2002 and for the first six months of 2002, the Company amortized $310,000 and $730,000, respectively, of deferred hedging gain into oil and gas revenues.
 
Based on June 30, 2002 NYMEX futures prices, the fair value of the Company’s hedging arrangements at June 30, 2002 was a loss of $5.7 million. A 10% increase in both the oil price and the gas price would increase this loss by $3.8 million and a 10% decrease in both the oil price and the gas price would decrease this loss by $4.0 million.

7

THE WISER OIL COMPANY
 
NOTES TO FINANCIAL STATEMENTS—(Continued)

 
Note 2.    Net Income per Common Share
 
Basic net income per common share is computed based on the weighted average shares of common stock outstanding. Net income per share computations to reconcile basic and diluted net income consist of the following (in thousands, except per share data):
 
    
For the Quarter Ended June 30,
     
For the Six Months Ended June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Net income (loss)
   
$
(4,994
)
   
$
10,231
 
   
$
(17,552
)
   
$
16,327
 
Less preferred dividends
   
 
(436
)
   
 
(319
)
   
 
(867
)
   
 
(578
)
Less amortization of preferred stock discount
   
 
(1,224
)
   
 
(323
)
   
 
(2,372
)
   
 
(323
)
    
  
  
  
Net income (loss) available to common stock
   
 
(6,654
)
   
 
9,589
 
   
 
(20,791
)
   
 
15,426
 
Plus: Income impact of assumed conversions:
                                    
Dividends and amortization on preferred stock
   
 
1,660
 
   
 
642
 
   
 
3,239
 
   
 
901
 
    
  
  
  
Net income (loss) available to common stock plus assumed conversions
   
$
(4,994
)
   
$
10,231
 
   
$
(17,552
)
   
$
16,327
 
    
  
  
  
Basic weighted average shares
   
 
9,285
 
   
 
9,161
 
   
 
9,264
 
   
 
9,121
 
Effect of dilutive securities:
                                    
Convertible preferred stock
   
 
5,882
 
   
 
4,305
 
   
 
5,882
 
   
 
3,929
 
Warrants
   
 
107
 
   
 
231
 
   
 
113
 
   
 
186
 
Stock options
   
 
1
 
   
 
4
 
   
 
2
 
   
 
4
 
    
  
  
  
Diluted weighted average shares
   
 
15,275
 
   
 
13,701
 
   
 
15,261
 
   
 
13,240
 
    
  
  
  
Net Income (Loss) per Share:
                                    
Basic
   
$
(0.72
)
   
$
1.05
 
   
$
(2.24
)
   
$
1.69
 
Diluted
   
 
(0.72
)
   
 
0.75
 
   
 
(2.24
)
   
 
1.23
 
 
The effect of the dilutive securities for the quarter and six months ended June 30, 2002 was antidilutive.
 
Note 3.    Long-term Debt
 
In April 2002, the borrowing base under the revolving credit facility was reviewed by the banks and increased from $50 million to $60 million. The borrowing base is allocated $40 million for general corporate purposes and $20 million exclusively for acquisition of oil and gas properties. Available credit under the revolving credit facility at June 30, 2002 was $12.5 million.

8

THE WISER OIL COMPANY
 
NOTES TO FINANCIAL STATEMENTS—(Continued)

Note 4.    Summary of Guaranties of 9 ½% Senior Subordinated Notes
 
In May 1998, the Company issued $125 million aggregate principal amount of its 9 ½% Senior Subordinated Notes due 2007 pursuant to an offering exempt from registration under the Securities Act of 1933. The notes are unsecured obligations of the Company, subordinated in right of payment to all existing and any future senior indebtedness of the Company. The notes rank pari passu with any future senior subordinated indebtedness and senior to any future junior subordinated indebtedness of the Company. The notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured, senior subordinated basis by wholly owned subsidiaries of the Company (the “Subsidiary Guarantors”). At the time of the initial issuance of the notes, Wiser Oil Delaware, Inc., The Wiser Marketing Company, Wiser Delaware LLC, T.W.O.C., Inc. and The Wiser Oil Company of Canada were the Subsidiary Guarantors (the “Initial Subsidiary Guarantors”). Except for two wholly owned subsidiaries that are inconsequential to the Company on a consolidated basis, the Initial Subsidiary Guarantors comprise all of the Company’s direct and indirect subsidiaries.

9

THE WISER OIL COMPANY
 
NOTES TO FINANCIAL STATEMENTS—(Continued)

Sections 13 and 15(d) of the Securities Exchange Act of 1934 require presentation of the following unaudited summarized financial information of the Subsidiary Guarantors. The Company has not presented separate financial statements and other disclosures concerning each Subsidiary Guarantor because such information is not material to investors. There are no significant contractual restrictions on distributions from each of the Subsidiary Guarantors to the Company.
 
    
Wiser Oil (Parent)
     
Subsidiary Guarantors
       
Consolidation Adjustments
   
Total
  
    
(000’s)
  
Condensed Income Statements for the Quarter Ended June 30, 2002
                                    
Revenues:
                                    
Oil and gas sales
   
$
11,755
 
   
$
7,609
 
     
$
—  
   
$
19,364
 
Other
   
 
274
 
   
 
(32
)
     
 
—  
   
 
242
 
    
  
    
  
Total revenues
   
 
12,029
 
   
 
7,577
 
     
 
—  
   
 
19,606
 
    
  
    
  
Costs and Expenses:
                                    
Production and operating
   
 
4,463
 
   
 
1,931
 
     
 
—  
   
 
6,394
 
Depletion, depreciation and amortization
   
 
3,086
 
   
 
3,918
 
     
 
—  
   
 
7,004
 
Exploration
   
 
3,302
 
   
 
2,568
 
     
 
—  
   
 
5,870
 
General and administrative
   
 
1,692
 
   
 
842
 
     
 
—  
   
 
2,534
 
Interest expense
   
 
3,304
 
   
 
223
 
     
 
—  
   
 
3,527
 
    
  
    
  
Total Expenses
   
 
15,847
 
   
 
9,482
 
     
 
—  
   
 
25,329
 
    
  
    
  
Loss Before Income Taxes
   
 
(3,818
)
   
 
(1,905
)
     
 
—  
   
 
(5,723
)
Income tax benefit
   
 
—  
 
   
 
729
 
     
 
—  
   
 
729
 
    
  
    
  
Net Loss
   
$
(3,818
)
   
$
(1,176
)
     
$
—  
   
$
(4,994
)
    
  
    
  
Condensed Income Statements for the Quarter Ended June 30, 2001
                                    
Revenues:
                                    
Oil and gas sales
   
$
12,037
 
   
$
8,370
 
     
$
—  
   
$
20,407
 
Other
   
 
742
 
   
 
8,333
 
     
 
—  
   
 
9,075
 
    
  
    
  
Total revenues
   
 
12,779
 
   
 
16,703
 
     
 
—  
   
 
29,482
 
    
  
    
  
Costs and Expenses:
                                    
Production and operating
   
 
6,050
 
   
 
1,422
 
     
 
—  
   
 
7,472
 
Depletion, depreciation and amortization
   
 
2,116
 
   
 
2,489
 
     
 
—  
   
 
4,605
 
Exploration
   
 
1,271
 
   
 
386
 
     
 
—  
   
 
1,657
 
General and administrative
   
 
1,473
 
   
 
533
 
     
 
—  
   
 
2,006
 
Interest expense
   
 
3,209
 
   
 
113
 
     
 
—  
   
 
3,322
 
    
  
    
  
Total Expenses
   
 
14,119
 
   
 
4,943
 
     
 
—  
   
 
19,062
 
    
  
    
  
Income (Loss) Before Income Taxes
   
 
(1,340
)
   
 
11,760
 
     
 
—  
   
 
10,420
 
Income tax expense
   
 
—  
 
   
 
(189
)
     
 
—  
   
 
(189
)
    
  
    
  
Net Income (Loss)
   
$
(1,340
)
   
$
11,571
 
     
$
—  
   
$
10,231
 
    
  
    
  

10

THE WISER OIL COMPANY
 
NOTES TO FINANCIAL STATEMENTS—(Continued)
 
    
Wiser Oil (Parent)
     
Subsidiary Guarantors
       
Consolidation Adjustments
   
Total
  
    
(000’s)
  
Condensed Income Statements for the Six Months Ended June 30, 2002
                                    
Revenues:
                                    
Oil and gas sales
   
$
18,005
 
   
$
15,716
 
     
$
—  
   
$
33,721
 
Other
   
 
133
 
   
 
500
 
     
 
—  
   
 
633
 
    
  
    
  
Total revenues
   
 
18,138
 
   
 
16,216
 
     
 
—  
   
 
34,354
 
    
  
    
  
Costs and Expenses:
                                    
Production and operating
   
 
8,970
 
   
 
4,498
 
     
 
—  
   
 
13,468
 
Depreciation, depletion and amortization
   
 
5,594
 
   
 
7,330
 
     
 
—  
   
 
12,924
 
Loss on derivatives
   
 
6,138
 
   
 
1,183
 
     
 
—  
   
 
7,321
 
Exploration
   
 
4,362
 
   
 
3,598
 
     
 
—  
   
 
7,960
 
General and administrative
   
 
3,354
 
   
 
1,615
 
     
 
—  
   
 
4,969
 
Interest expense
   
 
6,564
 
   
 
474
 
     
 
—  
   
 
7,038
 
    
  
    
  
Total Expenses
   
 
34,982
 
   
 
18,698
 
     
 
—  
   
 
53,680
 
    
  
    
  
Loss Before Income Taxes
   
 
(16,844
)
   
 
(2,482
)
     
 
—  
   
 
(19,326
)
Income tax benefit
   
 
—  
 
   
 
1,774
 
     
 
—  
   
 
1,774
 
    
  
    
  
Net Loss
   
$
(16,844
)
   
$
(708
)
     
$
—  
   
$
(17,552
)
    
  
    
  
Condensed Income Statements for the Six Months Ended June 30, 2001
                                    
Revenues:
                                    
Oil and gas sales
   
$
28,424
 
   
$
15,812
 
     
$
—  
   
$
44,236
 
Other
   
 
1,357
 
   
 
8,388
 
     
 
—  
   
 
9,745
 
    
  
    
  
Total revenues
   
 
29,781
 
   
 
24,200
 
     
 
—  
   
 
53,981
 
    
  
    
  
Costs and Expenses:
                                    
Production and operating
   
 
11,913
 
   
 
2,448
 
     
 
—  
   
 
14,361
 
Depreciation, depletion and amortization
   
 
4,633
 
   
 
4,163
 
     
 
—  
   
 
8,796
 
Exploration
   
 
2,936
 
   
 
968
 
     
 
—  
   
 
3,904
 
General and administrative
   
 
2,895
 
   
 
1,029
 
     
 
—  
   
 
3,924
 
Interest expense
   
 
6,367
 
   
 
113
 
     
 
—  
   
 
6,480
 
    
  
    
  
Total Expenses
   
 
28,744
 
   
 
8,721
 
     
 
—  
   
 
37,465
 
    
  
    
  
Income Before Income Taxes
   
 
1,037
 
   
 
15,479
 
     
 
—  
   
 
16,516
 
Income tax expense
   
 
—  
 
   
 
(189
)
     
 
—  
   
 
(189
)
    
  
    
  
Net Income
   
$
1,037
 
   
$
15,290
 
     
$
—  
   
$
16,327
 
    
  
    
  

11

THE WISER OIL COMPANY
 
NOTES TO FINANCIAL STATEMENTS—(Continued)
    
Wiser Oil (Parent)
     
Subsidiary Guarantors
       
Consolidation Adjustments
   
Total
  
    
(000’s)
  
Condensed Statements of Cash Flows for The Six Months Ended June 30, 2002
                                    
Cash Flows From Operating Activities:
                                    
Net loss
   
$
(16,844
)
   
$
(708
)
     
$
—  
   
$
(17,552
)
Add back reconciling items
   
 
5,771
 
   
 
7,097
 
     
 
—  
   
 
12,868
 
Other changes
   
 
8,252
 
   
 
7,300
 
     
 
—  
   
 
15,552
 
    
  
    
  
Operating Cash Flows
   
 
(2,821
)
   
 
13,689
 
     
 
—  
   
 
10,868
 
    
  
    
  
Cash Flows From Investing Activities:
                                    
Capital expenditures
   
 
(11,592
)
   
 
(19,291
)
     
 
—  
   
 
(30,883
)
Proceeds from sales of property and equipment
   
 
—  
 
   
 
2,259
 
     
 
—  
   
 
2,259
 
    
  
    
  
Investing Cash Flows
   
 
(11,592
)
   
 
(17,032
)
     
 
—  
   
 
(28,624
)
    
  
    
  
Cash Flows From Financing Activities:
                                    
Intercompany transfers
   
 
(1,663
)
   
 
1,663
 
     
 
—  
   
 
—  
 
Long term debt
   
 
7,500
 
   
 
—  
 
     
 
—  
   
 
7,500
 
Preferred dividends
   
 
(437
)
   
 
—  
 
     
 
—  
   
 
(437
)
    
  
    
  
Financing Cash Flows
   
 
5,400
 
   
 
1,663
 
     
 
—  
   
 
7,063
 
    
  
    
  
Effect of exchange rate changes on cash and cash equivalents
   
 
—  
 
   
 
84
 
     
 
—  
   
 
84
 
    
  
    
  
Net Decrease in Cash and Cash Equivalents
   
 
(9,013
)
   
 
(1,596
)
     
 
—  
   
 
(10,609
)
Cash and Cash Equivalents, beginning of period
   
 
10,377
 
   
 
2,282
 
     
 
—  
   
 
12,659
 
    
  
    
  
Cash and Cash Equivalents, end of period
   
$
1,364
 
   
$
686
 
     
$
—  
   
$
2,050
 
    
  
    
  
Condensed Statements of Cash Flows for The Six Months Ended June 30, 2001
                                    
Cash Flows From Operating Activities:
                                    
Net income
   
$
1,037
 
   
$
15,290
 
     
$
—  
   
$
16,327
 
Add back reconciling items
   
 
8,190
 
   
 
(6,508
)
     
 
—  
   
 
1,682
 
Other changes
   
 
(798
)
   
 
(157
)
     
 
—  
   
 
(955
)
    
  
    
  
Operating Cash Flows
   
 
8,429
 
   
 
8,625
 
     
 
—  
   
 
17,054
 
    
  
    
  
Cash Flows From Investing Activities:
                                    
Capital expenditures
   
 
(8,790
)
   
 
(48,159
)
     
 
—  
   
 
(56,949
)
Proceeds from sales of property and equipment
   
 
—  
 
   
 
—  
 
     
 
—  
   
 
—  
 
    
  
    
  
Investing Cash Flows
   
 
(8,790
)
   
 
(48,159
)
     
 
—  
   
 
(56,949
)
    
  
    
  
Cash Flows From Financing Activities:
                                    
Intercompany transfers
   
 
(20,500
)
   
 
20,500
 
     
 
—  
   
 
—  
 
Long term debt
   
 
(500
)
   
 
19,680
 
     
 
—  
   
 
19,180
 
Preferred stock issued
   
 
10,000
 
   
 
—  
 
     
 
—  
   
 
10,000
 
Common stock issued
   
 
25
 
   
 
—  
 
     
 
—  
   
 
25
 
Warrants issued
   
 
6
 
   
 
—  
 
     
 
—  
   
 
6
 
    
  
    
  
Financing Cash Flows
   
 
(10,969
)
   
 
40,180
 
     
 
—  
   
 
29,211
 
    
  
    
  
Effect of exchange rate changes on cash and cash equivalents
   
 
—  
 
   
 
(731
)
     
 
—  
   
 
(731
)
    
  
    
  
Net Decrease in Cash and Cash Equivalents
   
 
(11,330
)
   
 
(85
)
     
 
—  
   
 
(11,415
)
Cash and Cash Equivalents, beginning of period
   
 
29,518
 
   
 
4,626
 
     
 
—  
   
 
34,144
 
    
  
    
  
Cash and Cash Equivalents, end of period
   
$
18,188
 
   
$
4,541
 
     
$
—  
   
$
22,729
 
    
  
    
  

12

THE WISER OIL COMPANY
 
NOTES TO FINANCIAL STATEMENTS—(Continued)
 
    
Wiser Oil (Parent)
   
Subsidiary Guarantors
   
Consolidation Adjustments
     
Total
Condensed Balance Sheets as of June 30, 2002
                              
Assets:
                              
Current assets
   
$
8,798
   
$
12,737
   
$
—  
 
   
$
21,535
Net property and equipment
   
 
126,166
   
 
116,516
   
 
—  
 
   
 
242,682
Other assets
   
 
89,501
   
 
—  
   
 
(86,678
)
   
 
2,823
    
  
  
  
Total Assets
   
$
224,465
   
$
129,253
   
$
(86,678
)
   
$
267,040
    
  
  
  
Liabilities and Stockholders’ Equity:
                              
Current liabilities
   
$
17,358
   
$
18,094
   
$
—  
 
   
$
35,452
Long-term debt
   
 
132,211
   
 
19,749
   
 
—  
 
   
 
151,960
Deferred income taxes
   
 
—  
   
 
9,790
   
 
—  
 
   
 
9,790
Stockholders’ equity
   
 
74,896
   
 
81,620
   
 
(86,678
)
   
 
69,838
    
  
  
  
Total Liabilities and Stockholders’ Equity
   
$
224,465
   
$
129,253
   
$
(86,678
)
   
$
267,040
    
  
  
  
Condensed Balance Sheets as of December 31, 2001
                              
Assets:
                              
Current assets
   
$
18,786
   
$
13,198
   
$
—  
 
   
$
31,984
Net property and equipment
   
 
120,789
   
 
102,875
   
 
—  
 
   
 
223,664
Other assets
   
 
79,536
   
 
—  
   
 
(76,394
)
   
 
3,142
    
  
  
  
Total Assets
   
$
219,111
   
$
116,073
   
$
(76,394
)
   
$
258,790
    
  
  
  
Liabilities and Stockholders’ Equity:
                              
Current liabilities
   
$
9,729
   
$
9,778
   
$
—  
 
   
$
19,507
Long-term debt
   
 
124,674
   
 
18,789
   
 
—  
 
   
 
143,463
Deferred income taxes
   
 
—  
   
 
11,110
   
 
—  
 
   
 
11,110
Stockholders’ equity
   
 
84,708
   
 
76,396
   
 
(76,394
)
   
 
84,710
    
  
  
  
Total Liabilities and Stockholders’ Equity
   
$
219,111
   
$
116,073
   
$
(76,394
)
   
$
258,790
    
  
  
  
 
 
See other notes to financial statements included in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2001.

13

 
THE WISER OIL COMPANY
 
Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Comparison of Quarters Ended June 30, 2002 and June 30, 2001
 
Revenues for the second quarter of 2002 decreased $10.2 million or 34% from the second quarter of 2001, due primarily to an $8.3 million gain on sale of property in the second quarter of 2001. Oil sales for the second quarter of 2002 were $1.0 million higher than the second quarter of 2001 due to higher oil production which was offset by lower oil prices. The average price received for oil sales in the second quarter of 2002 was $23.77 per barrel, down $1.87 per barrel or 7% from the second quarter of 2001. Net oil production for the second quarter of 2002 was 450,000 barrels, up 70,000 barrels or 19% from 380,000 barrels in the second quarter of 2001. The increase in oil production is attributable primarily to the Hayter field in Canada, which was 77,000 barrels higher than in the second quarter of 2001 while oil production at the Maljamar field was 24,000 barrels lower than in the second quarter of 2001. Gas sales for the second quarter of 2002 were $1.5 million lower than the second quarter of 2001 due to lower realized prices which were partially offset by higher gas production. The average price received for gas sales in the second quarter of 2002 was $2.77 per Mcf, a decrease of $1.44 per Mcf or 34% from the second quarter of 2001. Net gas production for the second quarter of 2002 was 3,006 MMCF, up 679 MMCF or 29% from the second quarter of 2001. The increase in gas production was attributable primarily to Invasion Energy Inc. (“Invasion”), which was acquired in May 2001 and produced 911 MMCF in the second quarter of 2002 compared to 353 MMCF in the second quarter of 2001. In addition, the second quarter of 2002 includes 245 MMCF new production from the Gulf of Mexico. During the second quarter of 2002, oil and gas sales were increased by $0.3 million from the amortization of other comprehensive income associated with the Company’s hedging activities. During the second quarter of 2001, oil and gas sales were increased by $0.03 million and other income was increased by $0.3 million from the Company’s hedging activities.
 
Production and operating expense for the second quarter of 2002 decreased $1.1 million or 14% from the second quarter of 2001 and, on a BOE basis, production and operating expense in the second quarter of 2002 decreased to $6.59 per BOE or 29% from $9.24 per BOE during the second quarter of 2001. The decrease in production and operating expense was attributable primarily to the Wellman field which was $0.9 million lower in the second quarter of 2002 than the second quarter of 2001 due primarily to reduced CO2 purchases. Depreciation, depletion and amortization for the second quarter of 2002, increased $2.4 million or 52% from the second quarter of 2001 due primarily to the Invasion acquisition and new production from the Gulf of Mexico.
 
Exploration expense for the second quarter of 2002 was $5.9 million, up $4.2 million from the second quarter of 2001 due to increased exploration activities in the second quarter of 2002. Second quarter 2002 exploration expense includes $2.3 million dry hole expense at Ship Shoal Block 164. General and administrative expense in the second quarter of 2002 was $2.5 million, up $0.5 million from the second quarter of 2001 due primarily to increased payroll costs and legal expense associated with the Company’s legal proceedings against Enron North America (“Enron”). Interest expense during the second quarter of 2002 was $3.5 million, up $0.2 million or 6% from the second quarter of 2001 due to borrowings under the Credit Agreement for the Invasion acquisition.
 
The Company had a net operating loss carryforward for Federal income tax purposes of $20.0 million at December 31, 2001. The tax benefits of carryforwards are recorded as an asset to the extent that management assesses the future utilization of such carryforwards as “more likely than not.” When the future utilization of some portion of the carryforwards is determined not to be “more likely than not,” a valuation allowance is provided to reduce the recorded tax benefits from such assets. At June 30, 2002, a valuation allowance was provided to reduce deferred tax assets to an amount equal to deferred tax liabilities. Accordingly, no U.S. Federal income tax expense was recognized in the second quarter of 2002. The Company recognized $0.7 million of Canadian income tax benefit in the first quarter of 2002 and $0.2 million of Canadian income tax expense in the second quarter of 2001 associated with Invasion operations.
 
The Company realized a net loss available to common stock of $6.7 million and basic loss per share of $0.72 in the second quarter of 2002 compared to a net income of $9.6 million and basic earnings per share of $1.05 during the second quarter of 2001. The second quarter 2002 net loss was significantly lower than the first quarter 2002 net loss due primarily to higher oil and gas prices, reduced loss on derivatives and offset by higher exploration expense. The Company’s net income in the future will continue to be significantly affected by changes in oil and gas prices and the results of exploration activities.

14

THE WISER OIL COMPANY
 
Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Comparison of Six Months Ended June 30, 2002 and June 30, 2001
 
Revenues for the first half of 2002 decreased $19.6 million or 36% from the first half of 2001, due to significantly lower oil and gas prices received in the first half of 2002 and an $8.3 million gain on sale of property in the second quarter of 2001. Increased production partially offset the decline in prices. Oil sales for the first half of 2002 were $0.9 million lower than the first half of 2001, as the average price received for oil sales in the first half of 2002 was $21.26 per barrel, down $4.83 per barrel or 19% from the first half of 2001. Net oil production for the first half of 2002 was 907,000 barrels, up 134,000 barrels or 17% from 773,000 barrels in the first half of 2001. The increase in oil production is attributable primarily to production from the Hayter field in Canada which was 164,000 barrels higher than in the first half of 2001 while oil production at the Maljamar field was 44,000 barrels lower than in the first half of 2001. Gas sales for the first half of 2002 were $8.4 million lower than in the first half of 2001 due to lower realized prices which were partially offset by higher gas production. The average price received for gas sales during the first half of 2002 was $2.42 per mcf, a decrease of $2.57 per mcf or 52% from the first half of 2001. Gas production for the first half of 2002 was 5,730 MMCF, up 1,261 MMCF or 28% from the first half of 2001. The increase in gas production was attributable primarily to Invasion Energy Inc. (“Invasion”), which was acquired in May 2001 and produced 1,663 MMCF in the first half of 2002 compared to 353 MMCF in the first half of 2001. In addition, the second quarter of 2002 includes 245 MMCF new production from the Gulf of Mexico. Oil and gas sales were increased by $0.7 million in the first half of 2002 from the amortization of other comprehensive income associated with the Company’s hedging activities. During the first half of 2001, oil and gas sales were reduced by $1.5 million and other income was increased by $0.3 million from the Company’s hedging activities.
 
Production and operating expense for the first half of 2002 decreased $0.9 million or 6% from the first half of 2001 and, on a BOE basis, decreased to $7.09 per BOE or 21% from $9.01 per BOE. The decrease in production and operating expense was attributable primarily to the Wellman field which was $1.7 million lower in the first half of 2002 than the first half of 2001 due primarily to reduced CO2 purchases. In addition, lower oil and gas prices led to decreased production taxes in the first half of 2002 which were $0.9 million lower than the first half of 2001. Offsetting these reductions in production and operating expense was increased production and operating expense at Invasion, acquired in May 2001, which was $1.7 million higher in the first half of 2002 than the first half of 2001. Depreciation, depletion and amortization for the first half of 2002 increased $4.1 million or 47% from the first half of 2001 due primarily to the Invasion acquisition and new production from the Gulf of Mexico. Exploration expense for the first half of 2002 was $8.0 million, up $4.1 million from the first half of 2001, and includes $2.3 million dry hole expense at Ship Shoal Block 164. General and administrative expense in the first half of 2002 was $4.9 million, up $1.0 million from the first half of 2001 due primarily to increased payroll costs and legal expense associated with the Company’s legal proceedings against Enron. Interest expense in the first half of 2002 was $7.0 million, up $0.5 from the first half of 2001.
 
The Company had a net operating loss carryforward for U.S. Federal income tax purposes of $20.0 million at December 31, 2001. The tax benefits of carryforwards are recorded as an asset to the extent that management assesses the future utilization of such carryforwards as “more likely than not.” When the future utilization of some portion of the carryforwards is determined not to be “more likely than not,” a valuation allowance is provided to reduce the recorded tax benefits from such assets. At June 30, 2002, a valuation allowance was provided to reduce deferred tax assets to an amount equal to deferred tax liabilities. Accordingly, no U.S. Federal income tax expense or benefit was recognized in the first half of 2002. The Company recognized $1.8 million of Canadian income tax benefit in the first half of 2002 and $0.2 million of Canadian income tax expense in the first half of 2001 associated with Invasion operations.
 
The Company realized a net loss available to common stock of $20.8 million and basic loss per share of $2.24 in the first half of 2002 compared to a net income of $15.4 million and basic earnings per share of $1.69 during the first half of 2001. The Company’s net income in the future will continue to be significantly affected by changes in oil and gas prices and the results of exploration activities.

15

 
Liquidity and Capital Resources
 
Operating cash flows during the first half of 2002 were $10.1 million, down $7.0 million from the first half of 2001. Changes in working capital increased cash flows from operations by $15.6 million, primarily due to a $10.5 million increase in accounts payable associated with capital expenditures and a $4.8 million increase in fair value of derivative liability. The Company received $2.3 million in sales proceeds in the first half of 2002 associated with the sale of two small non-strategic properties in Canada. Capital expenditures during the first half of 2002 were $33.6 million, consisting primarily of capital spending at Invasion and in the Gulf of Mexico. Capital expenditures in the first half of 2001 were $56.9 million including $37.5 million for the Invasion acquisition. The Company’s capital and exploration budget for 2002 is approximately $40.0 to $50.0 million compared to $76.1 million in 2001. The Company borrowed $7.5 million under its revolving credit facility to fund a portion of its first half 2002 capital expenditures. On a cash basis, the Company paid $6.5 million in interest expense in the first half of 2002 and no income taxes were paid in the first half of 2002. The Company’s cash balance at June 30, 2002 was $2.5 million.
 

16

 
THE WISER OIL COMPANY
 
Item 3.     Quantitative and Qualitative Disclosures About Market Risk
 
See Note 1 “Hedging Activities”.

17

THE WISER OIL COMPANY
 
PART II—OTHER INFORMATION
 
Item 4.    Submission of Matters to a Vote of Security Holders
 
(a)  The annual meeting of stockholders of The Wiser Oil Company was held in Dallas, Texas, at 3:00 p.m., local time, on May 20, 2002.
 
(b)  Proxies were solicited by the Board of Directors of The Wiser Oil Company pursuant to Regulation 14A under the Securities Exchange Act of 1934. There was no solicitation in opposition to the Board of Directors nominees as listed in the proxy statement and all of such nominees were duly elected.
 
(c)  Out of a total of 15,125,168 votes, representing one vote per share in respect to the 9,242,816 shares of Common Stock issued and outstanding and 5,882,352 votes with respect to the 1,000,000 shares of Convertible Preferred Stock issued and outstanding as of the March 29, 2002 record date, 14,477,998 votes were present in person or by proxy, representing approximately 96 percent of the total number of votes. The stockholders at the annual meeting voted one matter, as fully described in the proxy statement. The results of voting were as follows:
 
 
1.
 
To elect Richard R. Schreiber, Lorne H. Larson and George K. Hickox, Jr. to serve three-year terms on the Board of Directors of The Wiser Oil Company.
 
Nominee
For Re-election
As Director
   
Number of Shares
Voting FOR Election
as Director
     
Number of Shares
WITHHOLDING AUTHORITY
to Vote for Election as Director
Richard R. Schreiber
   
14,417,035
     
  60,953
Lorne H. Larson
   
14,419,385
     
  58,603
George K. Hickox, Jr.
   
14,361,225
     
116,763
 
The following individuals continued their respective terms of service as Directors of The Wiser Oil Company following the meeting:
 
A. W. Schenck, III
C. Frayer Kimball, III
Eric D. Long
Scott W. Smith

18

THE WISER OIL COMPANY
 
PART II—OTHER INFORMATION
 
Item 6.    Exhibits and Reports on Form 8-K
 
(a)   Exhibits
 
The information required by this Item 6 (a) is set forth in the Index to Exhibits accompanying this quarterly report and is incorporated herein by reference.
 
(b)   Reports on Form 8-K
 
None

19

 
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.
 
 
   
THE WISER OIL COMPANY
(Registrant)
 
Date:     August 13, 2002
   
/s/    GEORGE K. HICKOX, JR.        
   
George K. Hickox, Jr.
Chairman of the Board and
Chief Executive Officer
 
Date:     August 13, 2002
   
/s/    RICHARD S. DAVIS        
   
Richard S. Davis
Vice President of Finance

20

 
THE WISER OIL COMPANY
 
Index to Exhibits
 
 Exhibit Number
   
Exhibit
None
     
 
†
 
Filed herewith.

21