þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
OKLAHOMA | 73-1055775 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
June 30, 2011 | September 30, 2010 | |||||||
(unaudited) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 5,623,125 | $ | 5,597,258 | ||||
Oil and natural gas sales receivables, net of allowance
for uncollectible accounts |
8,409,724 | 9,063,002 | ||||||
Derivative contracts |
292,759 | 1,481,527 | ||||||
Refundable income taxes |
878,860 | - | ||||||
Refundable production taxes |
284,730 | 804,120 | ||||||
Other |
77,845 | 412,778 | ||||||
Total current assets |
15,567,043 | 17,358,685 | ||||||
Properties and equipment, at cost, based on
successful efforts accounting: |
||||||||
Producing oil and natural gas properties |
222,650,712 | 207,928,578 | ||||||
Non-producing oil and natural gas properties |
10,686,973 | 9,616,330 | ||||||
Furniture and fixtures |
667,432 | 656,889 | ||||||
234,005,117 | 218,201,797 | |||||||
Less accumulated depreciation, depletion and amortization |
142,590,914 | 131,983,249 | ||||||
Net properties and equipment |
91,414,203 | 86,218,548 | ||||||
Investments |
625,341 | 754,208 | ||||||
Derivative contracts |
- | 138,799 | ||||||
Refundable production taxes |
1,214,795 | 654,599 | ||||||
Total assets |
$ | 108,821,382 | $ | 105,124,839 | ||||
Liabilities and Stockholders Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 5,558,643 | $ | 5,062,806 | ||||
Deferred income taxes |
19,100 | 354,100 | ||||||
Accrued income taxes |
- | 922,136 | ||||||
Other liabilities |
962,583 | 920,782 | ||||||
Total current liabilities |
6,540,326 | 7,259,824 | ||||||
Deferred income taxes |
24,235,650 | 22,552,650 | ||||||
Asset retirement obligations |
1,750,938 | 1,730,369 | ||||||
Derivative contracts |
21,310 | - | ||||||
Stockholders equity: |
||||||||
Class A
voting common stock, $.0166 par value; 24,000,000 shares authorized, 8,431,502 issued
at June 30, 2011, and September 30, 2010 |
140,524 | 140,524 | ||||||
Capital in excess of par value |
1,922,029 | 1,816,365 | ||||||
Deferred directors compensation |
2,552,459 | 2,222,127 | ||||||
Retained earnings |
77,706,189 | 73,599,733 | ||||||
82,321,201 | 77,778,749 | |||||||
Less
treasury stock, at cost; 186,041 shares at June 30, 2011, and 120,560 at September 30, 2010 |
(6,048,043 | ) | (4,196,753 | ) | ||||
Total stockholders equity |
76,273,158 | 73,581,996 | ||||||
Total liabilities and stockholders equity |
$ | 108,821,382 | $ | 105,124,839 | ||||
(1)
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Revenues: |
||||||||||||||||
Oil and natural gas (and associated
natural gas liquids) sales |
$ | 11,190,482 | $ | 9,659,803 | $ | 31,829,991 | $ | 32,981,230 | ||||||||
Lease bonuses and rentals |
83,485 | 934,532 | 225,340 | 1,057,468 | ||||||||||||
Gains (losses) on derivative contracts |
344,856 | (218,935 | ) | 332,183 | 5,410,714 | |||||||||||
Income from partnerships |
69,594 | 86,470 | 179,910 | 190,694 | ||||||||||||
11,688,417 | 10,461,870 | 32,567,424 | 39,640,106 | |||||||||||||
Costs and expenses: |
||||||||||||||||
Lease operating expenses |
2,212,181 | 1,681,982 | 6,491,630 | 6,166,102 | ||||||||||||
Production taxes |
268,425 | 236,793 | 1,035,497 | 1,041,738 | ||||||||||||
Exploration costs |
418,055 | 538,262 | 995,512 | 1,415,025 | ||||||||||||
Depreciation, depletion and amortization |
3,716,460 | 5,221,723 | 10,782,656 | 15,998,498 | ||||||||||||
Provision for impairment |
2,927 | - | 830,946 | 12,370 | ||||||||||||
Loss (gain) on asset sales, interest and other |
(44,279 | ) | (989,152 | ) | (63,505 | ) | (987,333 | ) | ||||||||
General and administrative |
1,423,219 | 1,507,962 | 4,529,157 | 4,353,462 | ||||||||||||
7,996,988 | 8,197,570 | 24,601,893 | 27,999,862 | |||||||||||||
Income before provision for income taxes |
3,691,429 | 2,264,300 | 7,965,531 | 11,640,244 | ||||||||||||
Provision for income taxes |
1,041,000 | 753,000 | 2,116,000 | 3,257,000 | ||||||||||||
Net income |
$ | 2,650,429 | $ | 1,511,300 | $ | 5,849,531 | $ | 8,383,244 | ||||||||
Basic and diluted earnings per common share (Note 3) |
$ | 0.32 | $ | 0.18 | $ | 0.70 | $ | 1.00 | ||||||||
Basic and diluted weighted average shares outstanding: |
||||||||||||||||
Common shares |
8,256,252 | 8,311,636 | 8,279,784 | 8,311,636 | ||||||||||||
Unissued, directors deferred compensation shares |
123,310 | 112,160 | 119,943 | 110,640 | ||||||||||||
8,379,562 | 8,423,796 | 8,399,727 | 8,422,276 | |||||||||||||
Dividends declared per share of
common stock and paid in period |
$ | 0.07 | $ | 0.07 | $ | 0.21 | $ | 0.21 | ||||||||
(2)
Class A voting | Capital in | Deferred | ||||||||||||||||||||||||||||||
Common Stock | Excess of | Directors | Retained | Treasury | Treasury | |||||||||||||||||||||||||||
Shares | Amount | Par Value | Compensation | Earnings | Shares | Stock | Total | |||||||||||||||||||||||||
Balances at September 30, 2010 |
8,431,502 | $ | 140,524 | $ | 1,816,365 | $ | 2,222,127 | $ | 73,599,733 | (120,560 | ) | $ | (4,196,753 | ) | $ | 73,581,996 | ||||||||||||||||
Purchase of treasury stock |
| | | | | (65,481 | ) | (1,851,290 | ) | (1,851,290 | ) | |||||||||||||||||||||
Restricted stock awards |
| | 105,664 | | | | | 105,664 | ||||||||||||||||||||||||
Net income |
| | | | 5,849,531 | | | 5,849,531 | ||||||||||||||||||||||||
Dividends ($.21 per share) |
| | | | (1,743,075 | ) | | | (1,743,075 | ) | ||||||||||||||||||||||
Increase in deferred directors
compensation charged to expense |
| | | 330,332 | | | | 330,332 | ||||||||||||||||||||||||
Balances at
June 30, 2011 (unaudited) |
8,431,502 | $ | 140,524 | $ | 1,922,029 | $ | 2,552,459 | $ | 77,706,189 | (186,041 | ) | $ | (6,048,043 | ) | $ | 76,273,158 | ||||||||||||||||
Class A voting | Capital in | Deferred | ||||||||||||||||||||||||||||||
Common Stock | Excess of | Directors | Retained | Treasury | Treasury | |||||||||||||||||||||||||||
Shares | Amount | Par Value | Compensation | Earnings | Shares | Stock | Total | |||||||||||||||||||||||||
Balances at September 30, 2009 |
8,431,502 | $ | 140,524 | $ | 1,922,053 | $ | 1,862,499 | $ | 64,507,547 | (119,866 | ) | $ | (4,310,280 | ) | $ | 64,122,343 | ||||||||||||||||
Net income |
| | | | 8,383,244 | | | 8,383,244 | ||||||||||||||||||||||||
Dividends ($.21 per share) |
| | | | (1,745,444 | ) | | | (1,745,444 | ) | ||||||||||||||||||||||
Increase in deferred directors
compensation charged to expense |
| | | 319,151 | | | | 319,151 | ||||||||||||||||||||||||
Balances at
June 30, 2010 (unaudited) |
8,431,502 | $ | 140,524 | $ | 1,922,053 | $ | 2,181,650 | $ | 71,145,347 | (119,866 | ) | $ | (4,310,280 | ) | $ | 71,079,294 | ||||||||||||||||
(3)
Nine months ended June 30, | ||||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Operating Activities |
||||||||
Net income |
$ | 5,849,531 | $ | 8,383,244 | ||||
Adjustments to reconcile net income to net cash provided
by operating activities: |
||||||||
Depreciation, depletion and amortization |
10,782,656 | 15,998,498 | ||||||
Impairment |
830,946 | 12,370 | ||||||
Provision for deferred income taxes |
1,348,000 | 613,000 | ||||||
Exploration costs |
995,512 | 1,039,905 | ||||||
Net (gain) loss on sale of assets |
(223,587 | ) | (1,139,072 | ) | ||||
Income from partnerships |
(40,722 | ) | (190,694 | ) | ||||
Distributions received from partnerships |
289,582 | 270,817 | ||||||
Directors deferred compensation expense |
330,332 | 319,151 | ||||||
Restricted stock awards |
105,664 | - | ||||||
Other |
- | 64,555 | ||||||
Cash provided by changes in assets and liabilities: |
||||||||
Oil and natural gas sales receivables |
653,278 | (458,037 | ) | |||||
Fair value of derivative contracts |
1,348,877 | (4,301,814 | ) | |||||
Refundable production taxes |
(40,806 | ) | 12,876 | |||||
Other current assets |
334,933 | (1,153,067 | ) | |||||
Accounts payable |
36,593 | 143,270 | ||||||
Income taxes receivable |
(878,860 | ) | - | |||||
Income taxes payable |
(922,136 | ) | 360,966 | |||||
Accrued liabilities |
41,801 | 259,172 | ||||||
Total adjustments |
14,992,063 | 11,851,896 | ||||||
Net cash provided by operating activities |
20,841,594 | 20,235,140 | ||||||
Investing Activities |
||||||||
Capital expenditures, including dry hole costs |
(17,358,890 | ) | (8,189,105 | ) | ||||
Proceeds from leasing of fee mineral acreage |
256,583 | 1,256,102 | ||||||
Investments in partnerships |
(119,993 | ) | (43,413 | ) | ||||
Proceeds from sales of assets |
938 | 401,168 | ||||||
Net cash used in investing activities |
(17,221,362 | ) | (6,575,248 | ) | ||||
Financing Activities |
||||||||
Borrowings under debt agreement |
- | 10,799,814 | ||||||
Payments of loan principal |
- | (21,184,536 | ) | |||||
Purchase of treasury stock |
(1,851,290 | ) | - | |||||
Payments of dividends |
(1,743,075 | ) | (1,745,444 | ) | ||||
Net cash provided by (used in) financing activities |
(3,594,365 | ) | (12,130,166 | ) | ||||
Increase (decrease) in cash and cash equivalents |
25,867 | 1,529,726 | ||||||
Cash and cash equivalents at beginning of period |
5,597,258 | 639,908 | ||||||
Cash and cash equivalents at end of period |
$ | 5,623,125 | $ | 2,169,634 | ||||
Supplemental Schedule of Noncash Investing and Financing Activities |
||||||||
Additions to asset retirement obligations |
$ | 20,569 | $ | 18,950 | ||||
Gross additions to properties and equipment |
$ | 17,818,134 | $ | 7,541,102 | ||||
Net (increase) decrease in accounts payable for properties
and equipment additions |
(459,244 | ) | 648,003 | |||||
Capital expenditures, including dry hole costs |
$ | 17,358,890 | $ | 8,189,105 | ||||
(4)
(5)
Unvested | Weighted | |||||||
Restricted | Average Grant- | |||||||
Shares | Date Fair Value | |||||||
Unvested shares as of September 30, 2010 |
8,500 | $ | 28.30 | |||||
Granted |
8,780 | $ | 28.00 | |||||
Vested |
- | $ | - | |||||
Forfeited |
- | $ | - | |||||
Unvested shares as of June 30, 2011 |
17,280 | $ | 28.15 |
(6)
(7)
Production volume | Indexed (1) | |||||
Contract period | covered per month | Pipeline | Fixed price | |||
Natural gas fixed price swaps |
||||||
April - October 2011 |
50,000 Mmbtu | NYMEX Henry Hub | $4.65 | |||
April - October 2011 |
50,000 Mmbtu | NYMEX Henry Hub | $4.65 | |||
April - October 2011 |
50,000 Mmbtu | NYMEX Henry Hub | $4.70 | |||
April - October 2011 |
50,000 Mmbtu | NYMEX Henry Hub | $4.75 | |||
May - October 2011 |
50,000 Mmbtu | NYMEX Henry Hub | $4.50 | |||
May - October 2011 |
50,000 Mmbtu | NYMEX Henry Hub | $4.60 | |||
June - October 2011 |
50,000 Mmbtu | NYMEX Henry Hub | $4.63 | |||
Natural gas basis protection swaps | ||||||
January - December 2011 |
50,000 Mmbtu | CEGT | NYMEX -$.27 | |||
January - December 2011 |
50,000 Mmbtu | CEGT | NYMEX -$.27 | |||
January - December 2011 |
50,000 Mmbtu | PEPL | NYMEX -$.26 | |||
January - December 2011 |
50,000 Mmbtu | PEPL | NYMEX -$.27 | |||
January - December 2011 |
70,000 Mmbtu | PEPL | NYMEX -$.36 | |||
January - December 2012 |
50,000 Mmbtu | CEGT | NYMEX -$.29 | |||
January - December 2012 |
40,000 Mmbtu | CEGT | NYMEX -$.30 | |||
January - December 2012 |
50,000 Mmbtu | PEPL | NYMEX -$.29 | |||
January - December 2012 |
50,000 Mmbtu | PEPL | NYMEX -$.30 | |||
Oil costless collars |
||||||
April - December 2011 |
5,000 Bbls | NYMEX WTI | $100 floor/$112 ceiling |
(1) | CEGT - Centerpoint Energy Gas Transmissions East pipeline in Oklahoma PEPL - Panhandle Eastern Pipeline Companys Texas/Oklahoma mainline |
Production volume | Indexed (1) | |||||
Contract period | covered per month | Pipeline | Fixed price | |||
Fixed price swaps |
||||||
January - December 2010 |
100,000 Mmbtu | CEGT | $5.015 | |||
January - December 2010 |
50,000 Mmbtu | CEGT | $5.050 | |||
January - December 2010 |
100,000 Mmbtu | PEPL | $5.570 | |||
January - December 2010 |
50,000 Mmbtu | PEPL | $5.560 | |||
Basis protection swaps |
||||||
January - December 2011 |
50,000 Mmbtu | CEGT | NYMEX -$.27 | |||
January - December 2011 |
50,000 Mmbtu | CEGT | NYMEX -$.27 | |||
January - December 2011 |
50,000 Mmbtu | PEPL | NYMEX -$.26 | |||
January - December 2011 |
50,000 Mmbtu | PEPL | NYMEX -$.27 | |||
January - December 2012 |
50,000 Mmbtu | CEGT | NYMEX -$.29 | |||
January - December 2012 |
40,000 Mmbtu | CEGT | NYMEX -$.30 | |||
January - December 2012 |
50,000 Mmbtu | PEPL | NYMEX -$.29 | |||
January - December 2012 |
50,000 Mmbtu | PEPL | NYMEX -$.30 |
(1) | CEGT - Centerpoint Energy Gas Transmissions East pipeline in Oklahoma PEPL - Panhandle Eastern Pipeline Companys Texas/Oklahoma mainline |
(8)
Gains (losses) on | Three months ended | Nine months ended | ||||||||||||||
derivative contracts | 6/30/2011 | 6/30/2010 | 6/30/2011 | 6/30/2010 | ||||||||||||
Realized |
$ | 195,210 | $ | 1,297,500 | $ | 1,681,060 | $ | 1,108,900 | ||||||||
Increase (decrease)
in fair value |
149,646 | (1,516,435 | ) | (1,348,877 | ) | 4,301,814 | ||||||||||
Total |
$ | 344,856 | $ | (218,935 | ) | $ | 332,183 | $ | 5,410,714 | |||||||
Balance Sheet | 6/30/2011 | 9/30/2010 | ||||||||
Location | Fair Value | Fair Value | ||||||||
Asset Derivatives: |
||||||||||
Derivatives not designated as Hedging Instruments: |
||||||||||
Commodity contracts |
Short-term derivative contracts | $ | 292,759 | $ | 1,481,527 | |||||
Commodity contracts |
Long-term derivative contracts | - | 138,799 | |||||||
Total Asset Derivatives (a) |
$ | 292,759 | $ | 1,620,326 | ||||||
Liability Derivatives: |
||||||||||
Derivatives not designated as Hedging Instruments: |
||||||||||
Commodity contracts |
Short-term derivative contracts | $ | - | $ | - | |||||
Commodity contracts |
Long-term derivative contracts | 21,310 | - | |||||||
Total Liability Derivatives (a) |
$ | 21,310 | $ | - | ||||||
(a) | See Fair Value Measurements section for further disclosures regarding fair value of financial instruments. |
(9)
Significant | ||||||||||||||||
Quoted Prices | Other | Significant | ||||||||||||||
in Active | Observable | Unobservable | ||||||||||||||
Markets | Inputs | Inputs | Total Fair | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Value | |||||||||||||
Financial Assets: |
||||||||||||||||
Derivative
Contracts - Swaps |
$ | - | $ | 84,451 | $ | - | $ | 84,451 | ||||||||
Derivative
Contracts - Collars |
$ | - | $ | - | $ | 186,998 | $ | 186,998 |
Level 2 - Market Approach - The fair values of the Companys natural gas swaps are based on a third-party pricing model which utilizes inputs that are either readily available in the public market, such as natural gas curves, or can be corroborated from active markets. These values are based upon, among other things, future prices and time to maturity. These values are then compared to the values given by our counterparties for reasonableness. | |||
Level 3 - The fair values of the Companys oil collar contracts are based on a pricing model which utilizes inputs that are unobservable or not readily available in the public market. These values are based upon, among other things, future prices, volatility, and time to maturity. These values are then compared to the values given by our counterparties for reasonableness. |
Derivatives | ||||
Balance of Level 3 as of October 1, 2010 |
$ | - | ||
Total gains or (losses) - realized and
unrealized: |
||||
Included in earnings |
186,998 | |||
Included in other
comprehensive
income (loss) |
- | |||
Purchases, issuances and settlements |
- | |||
Transfers in and out of Level 3 |
- | |||
Balance of Level 3 as of June 30, 2011 |
$ | 186,998 | ||
The following table presents impairments associated with certain assets that have been measured at fair value on a nonrecurring basis within Level 3 of the fair value hierarchy. |
Total Losses for the | Total Losses for the | |||||||
Three Months Ended | Nine Months Ended | |||||||
June 30, 2011 | June 30, 2011 | |||||||
Impairments: |
||||||||
Producing Properties (a) |
$ | 2,927 | $ | 830,946 |
(a) At the end of each quarter, the Company assesses the carrying value of its producing properties for impairment. This assessment utilizes estimates of future cash flows. Significant judgments and assumptions in these assessments include estimates of future oil and natural gas prices using a forward NYMEX curve adjusted for locational basis differentials, drilling plans, expected capital costs and an applicable discount rate commensurate with risk of the underlying cash flow estimates. These assessments identified certain properties with carrying value in excess of their calculated fair values. |
(10)
ITEM 2 | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Liquidity: |
2011 | 2010 | Change | ||||||||||
Operating activities |
$ | 20,841,594 | $ | 20,235,140 | $ | 606,454 | ||||||
Investing activities |
$ | (17,221,362 | ) | $ | (6,575,248 | ) | $ | (10,646,114 | ) | |||
Financing activities |
$ | (3,594,365 | ) | $ | (12,130,166 | ) | $ | 8,535,801 | ||||
Increase (decrease)
in cash and cash
equivalents |
$ | 25,867 | $ | 1,529,726 | $ | (1,503,859 | ) |
(11)
Operating activities: | |||
The increase of $606,454 in cash provided by operating activities is primarily the effect of the following: | |||
Increased collections of oil and natural gas sales for the 2011 period compared the 2010 period resulted in additional cash provided by operating activities of approximately $800,000. | |||
Higher realized gains on derivative contracts during 2011, compared to 2010, increased cash provided by operating activities by $572,160. Net realized gains on derivative contracts was $1,681,060 during the nine months ended June 30, 2011, compared to net realized gains of $1,108,900 during the nine months ended June 30, 2010. | |||
Cash expenditures for lease operating expenses increased approximately $700,000 in the 2011 period compared to the 2010 period. | |||
Investing activities: | |||
Investing activities were comprised of capital expenditures of $17,358,890 and $8,189,105 for the nine months ended June 30, 2011 and 2010, respectively. The capital expenditures increase of $9,169,785 was the result of increased drilling activity in areas where we own mineral and leasehold acreage (discussed in more detail below). | |||
Financing activities: | |||
The Company paid down its balance on the credit facility by $10,384,722 during the 2010 period. Having paid all of its previous borrowings under the credit facility in May 2010, no borrowings were made utilizing the Companys credit facility during the nine months ended June 30, 2011. The Company paid approximately $1.7 million in dividends during both the 2010 and 2011 periods. Also, stock repurchases in the amount of $1,851,290 were made in the 2011 period, while no stock repurchases were made in the 2010 period. |
(12)
Barrels | Average | Mcf | Average | Mcfe | Average | |||||||||||||||||||
Sold | Price | Sold | Price | Sold | Price | |||||||||||||||||||
Three months ended
6/30/11 |
25,382 | $ | 96.18 | 1,976,868 | $ | 4.43 | 2,129,160 | $ | 5.26 | |||||||||||||||
Three months ended
6/30/10 |
26,873 | $ | 73.65 | 2,074,998 | $ | 3.70 | 2,236,236 | $ | 4.32 |
Quarter ended | Barrels Sold | Mcf Sold | Mcfe Sold | |||||||||
6/30/11 |
25,382 | 1,976,868 | 2,129,160 | |||||||||
3/31/11 |
26,376 | 1,993,755 | 2,152,011 | |||||||||
12/31/10 |
24,965 | 2,058,428 | 2,208,218 | |||||||||
9/30/10 |
26,054 | 2,155,769 | 2,312,093 | |||||||||
6/30/10 |
26,873 | 2,074,998 | 2,236,236 |
(13)
(14)
Barrels | Average | Mcf | Average | Mcfe | Average | |||||||||||||||||||
Sold | Price | Sold | Price | Sold | Price | |||||||||||||||||||
Nine months ended
6/30/11 |
76,723 | $ | 88.10 | 6,029,051 | $ | 4.16 | 6,489,389 | $ | 4.90 | |||||||||||||||
Nine months ended
6/30/10 |
76,325 | $ | 73.16 | 6,146,573 | $ | 4.46 | 6,604,523 | $ | 4.99 |
(15)
ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
(16)
ITEM 4 | CONTROLS AND PROCEDURES |
ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Total Number | Approximate Dollar Value of |
|||||||||||||||
of Shares | Shares that May | |||||||||||||||
Purchased as | Yet Be | |||||||||||||||
Total Number | Part of Publicly | Purchased | ||||||||||||||
of Shares | Average Price | Announced | Under the | |||||||||||||
Period | Purchased | Paid per Share | Program | Program | ||||||||||||
4/1 - 4/30/11 |
4,355 | $ | 32.13 | 4,355 | $ | 1,300,000 | ||||||||||
5/1 - 5/31/11 |
4,883 | $ | 28.82 | 4,883 | $ | 1,200,000 | ||||||||||
6/1 - 6/30/11 |
10,561 | $ | 28.93 | 10,561 | $ | 900,000 | ||||||||||
Total |
19,799 | $ | 29.60 | 19,799 |
ITEM 6 | EXHIBITS AND REPORT ON FORM 8-K |
(a) | EXHIBITS | Exhibit 31.1 and 31.2 Certification under Section 302 of the
Sarbanes-Oxley Act of 2002 Exhibit 32.1 and 32.2 Certification under Section 906 of the Sarbanes-Oxley Act of 2002 |
(17)
Exhibit 101.INS XBRL Instance Document Exhibit 101.SCH XBRL Taxonomy Extension Schema Document Exhibit 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Exhibit 101.LAB XBRL Taxonomy Extension Labels Linkbase Document Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Exhibit 101.DEF XBRL Taxonomy Extension Definition Linkbase Document |
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(b) | Form 8-K Dated (8/2/11), item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers Form 8-K Dated (8/2/11), item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year Form 8-K/A (Amendment No. 1) Dated (6/10/11), item 5.07 Submission of Matters to a Vote of Security Holders |
PANHANDLE OIL AND GAS INC. | ||||
August 8, 2011
|
/s/ Michael C. Coffman | |||
Date
|
Michael C. Coffman, President and
Chief Executive Officer |
|||
August 8, 2011
|
/s/ Lonnie J. Lowry | |||
Date
|
Lonnie J. Lowry, Vice President
and Chief Financial Officer |
|||
August 8, 2011
|
/s/ Robb P. Winfield | |||
Date
|
Robb P. Winfield, Controller
and Chief Accounting Officer |
(18)
1. | I have reviewed this quarterly report on Form 10-Q of Panhandle Oil and Gas Inc. (the Company); | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f), for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ Michael C. Coffman | ||||
Michael C. Coffman | ||||
Chief Executive Officer | ||||
Date: August 8, 2011 |
(19)
1. | I have reviewed this quarterly report on Form 10-Q of Panhandle Oil and Gas Inc. (the Company); | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f), for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ Lonnie J. Lowry | ||||
Lonnie J. Lowry | ||||
Chief Financial Officer | ||||
Date: August 8, 2011 |
(20)
(1) | The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and | ||
(2) | The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. |
/s/ Michael C. Coffman | ||||
Michael C. Coffman | ||||
Chief Executive Officer | ||||
August 8, 2011 |
(21)
(1) | The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and | ||
(2) | The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. |
/s/ Lonnie J. Lowry | ||||
Lonnie J. Lowry | ||||
Chief Financial Officer | ||||
August 8, 2011 |
(22)
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
|
Jun. 30, 2011
|
Sep. 30, 2010
|
---|---|---|
Stockholders' equity: | Â | Â |
Common stock, par value | $ 0.0166 | $ 0.0166 |
Common stock, shares authorized | 24,000,000 | 24,000,000 |
Common stock, shares issued | 8,431,502 | 8,431,502 |
Treasury stock, shares at cost | 186,041 | 120,560 |
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
|
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Revenues: | Â | Â | Â | Â |
Oil and natural gas (and associated natural gas liquids) sales | $ 11,190,482 | $ 9,659,803 | $ 31,829,991 | $ 32,981,230 |
Lease bonuses and rentals | 83,485 | 934,532 | 225,340 | 1,057,468 |
Gains (losses) on derivative contracts | 344,856 | (218,935) | 332,183 | 5,410,714 |
Income from partnerships | 69,594 | 86,470 | 179,910 | 190,694 |
Total revenues | 11,688,417 | 10,461,870 | 32,567,424 | 39,640,106 |
Costs and expenses: | Â | Â | Â | Â |
Lease operating expenses | 2,212,181 | 1,681,982 | 6,491,630 | 6,166,102 |
Production taxes | 268,425 | 236,793 | 1,035,497 | 1,041,738 |
Exploration costs | 418,055 | 538,262 | 995,512 | 1,415,025 |
Depreciation, depletion and amortization | 3,716,460 | 5,221,723 | 10,782,656 | 15,998,498 |
Provision for impairment | 2,927 | Â | 830,946 | 12,370 |
Loss (gain) on asset sales, interest and other | (44,279) | (989,152) | (63,505) | (987,333) |
General and administrative | 1,423,219 | 1,507,962 | 4,529,157 | 4,353,462 |
Total costs and expenses | 7,996,988 | 8,197,570 | 24,601,893 | 27,999,862 |
Income before provision for income taxes | 3,691,429 | 2,264,300 | 7,965,531 | 11,640,244 |
Provision for income taxes | 1,041,000 | 753,000 | 2,116,000 | 3,257,000 |
Net income | $ 2,650,429 | $ 1,511,300 | $ 5,849,531 | $ 8,383,244 |
Basic and diluted earnings per common share (Note 3) | $ 0.32 | $ 0.18 | $ 0.70 | $ 1.00 |
Basic and diluted weighted average shares outstanding: | Â | Â | Â | Â |
Common shares | 8,256,252 | 8,311,636 | 8,279,784 | 8,311,636 |
Unissued, directors' deferred compensation shares | 123,310 | 112,160 | 119,943 | 110,640 |
Total basic and diluted weighted average shares outstanding | 8,379,562 | 8,423,796 | 8,399,727 | 8,422,276 |
Dividends declared per share of common stock and paid in period | $ 0.07 | $ 0.07 | $ 0.21 | $ 0.21 |
Document and Entity Information (USD $)
|
9 Months Ended | ||
---|---|---|---|
Jun. 30, 2011
|
Aug. 08, 2011
|
Mar. 31, 2010
|
|
Document and Entity Information [Abstract] | Â | Â | Â |
Entity Registrant Name | Panhandle Oil & Gas Inc. | Â | Â |
Entity Central Index Key | 0000315131 | Â | Â |
Document Type | 10-Q | Â | Â |
Document Period End Date | Jun. 30, 2011 | ||
Amendment Flag | false | Â | Â |
Document Fiscal Year Focus | 2011 | Â | Â |
Document Fiscal Period Focus | Q3 | Â | Â |
Current Fiscal Year End Date | --09-30 | Â | Â |
Entity Well-known Seasoned Issuer | No | Â | Â |
Entity Voluntary Filers | No | Â | Â |
Entity Current Reporting Status | Yes | Â | Â |
Entity Filer Category | Accelerated Filer | Â | Â |
Entity Public Float | Â | Â | $ 168,087,326 |
Entity Common Stock, Shares Outstanding | Â | 8,245,461 | Â |
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Deferred Compensation Plan for Directors
|
9 Months Ended |
---|---|
Jun. 30, 2011
|
|
Deferred Compensation Plan for Directors [Abstract] | Â |
Deferred Compensation Plan for Directors |
NOTE 5: Deferred Compensation Plan for Directors
The Company has a deferred compensation plan for non-employee directors (the Plan). The Plan
provides that each eligible director can individually elect to receive shares of Company stock
rather than cash for Board and committee chair retainers, Board meeting fees and Board committee
meeting fees. These shares are unissued and are credited to each director’s deferred fee account
at the closing market price of the stock on the date earned. Upon retirement, termination or death
of the director or upon a change in control of the Company, the shares accrued under the Plan will
be issued to the director.
|
Exploration Costs
|
9 Months Ended |
---|---|
Jun. 30, 2011
|
|
Exploration Costs [Abstract] | Â |
Exploration Costs |
NOTE 10: Exploration Costs
In the quarter and nine month periods ended June 30, 2011, lease expirations and leasehold
impairments of $305,156 and $455,486, respectively, were charged to exploration costs. Leasehold
impairments are recorded for individually insignificant non-producing leases which the Company
believes will not be transferred to proved properties over the remaining lives of the leases. In
the quarter and nine month periods ended June 30, 2011, the Company also had additional costs of
$112,899 and $540,026, respectively, related to exploratory dry hole expenses. In the quarter and
nine months ended June 30, 2010, lease expirations and impairments of $163,131 and $1,040,055,
respectively, were charged to exploration costs as well as additional costs of $375,131 related to
exploratory geological and geophysical expenses and dry holes.
Oil and natural gas properties include capitalized costs of $1,751,766 on exploratory wells
which were drilling and/or testing at June 30, 2011. These wells
are located in western Oklahoma where drilling has continued to
increase in natural gas liquids-rich areas. The Company is expecting to have evaluation
results on these wells within the next six months.
|
Accounting Principles and Basis of Presentation
|
9 Months Ended |
---|---|
Jun. 30, 2011
|
|
Accounting Principles and Basis of Presentation [Abstract] | Â |
Accounting Principles and Basis of Presentation |
NOTE 1: Accounting Principles and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Panhandle Oil and
Gas Inc. (the Company) have been prepared in accordance with the instructions to Form 10-Q as
prescribed by the Securities and Exchange Commission (SEC), and include the Company’s wholly-owned
subsidiary, Wood Oil Company (Wood). Management of the Company believes that all adjustments
necessary for a fair presentation of the consolidated financial position and results of operations
and cash flows for the periods have been included. All such adjustments are of a normal recurring
nature. The consolidated results are not necessarily indicative of those to be expected for the
full year. The Company’s fiscal year runs from October 1 through September 30.
Certain amounts and disclosures have been condensed or omitted from these consolidated
financial statements pursuant to the rules and regulations of the SEC. Therefore, these condensed
consolidated financial statements should be read in conjunction with the consolidated financial
statements and related notes thereto included in the Company’s 2010 Annual Report on Form 10-K.
|
Oil and Natural Gas Reserves
|
9 Months Ended |
---|---|
Jun. 30, 2011
|
|
Oil and Natural Gas Reserves [Abstract] | Â |
Oil and Natural Gas Reserves |
NOTE 7: Oil and Natural Gas Reserves
Management considers the estimation of the Company’s crude oil and natural gas reserves to be
the most significant of its judgments and estimates. Changes in crude oil and natural gas reserve
estimates affect the Company’s calculation of DD&A, provision for abandonment and assessment of the
need for asset impairments. On an annual basis, with a semi-annual
update, the Company’s
Independent Consulting Petroleum Engineer, with assistance from Company staff, prepares estimates
of crude oil and natural gas reserves based on available geologic and seismic data, reservoir
pressure data, core analysis reports, well logs, analogous reservoir performance history,
production data and other available sources of engineering, geological and geophysical information.
Between periods in which reserves would normally be calculated, the Company updates the reserve
calculations utilizing prices current with the period. As of September 30, 2010, the Company
adopted the SEC Rule, Modernization of Oil and Gas Reporting Requirements. Accordingly, the
estimated oil and natural gas reserves at June 30, 2011, were computed using the 12-month average
price calculated as the unweighted arithmetic average of the first-day-of-the-month oil and natural
gas price for each month within the 12-month period prior to June 30, 2011, held flat over the life
of the properties. In accordance with SEC rules effective on June 30, 2010, current pricing of oil
and natural gas on June 30, 2010, held flat over the life of the properties was used to estimate
oil and natural gas reserves as of June 30, 2010. Crude oil and natural gas prices are volatile
and largely affected by worldwide production and consumption and are outside the control of
management. However, projected future crude oil and natural gas pricing assumptions are used by
management to prepare estimates of crude oil and natural gas reserves and future net cash flows
used in asset impairment assessments and in formulating management’s overall operating decisions.
|
Fair Values of Financial Instruments
|
9 Months Ended |
---|---|
Jun. 30, 2011
|
|
Fair Values of Financial Instruments [Abstract] | Â |
Fair Values of Financial Instruments |
NOTE 12: Fair Values of Financial Instruments
The carrying amounts reported in the balance sheets for cash and cash equivalents,
receivables, refundable income taxes, accounts payable and accrued liabilities approximate their
fair values due to the short maturity of these instruments. The fair value of the Company’s debt
approximates its carrying amount, if any, due to the interest rates on the Company’s revolving line
of credit being rates which are approximately equivalent to market rates for similar type debt
based on the Company’s
credit
worthiness.
|
Impairment
|
9 Months Ended |
---|---|
Jun. 30, 2011
|
|
Impairment [Abstract] | Â |
Impairment |
NOTE 8: Impairment
All long-lived assets, principally oil and natural gas properties, are monitored for potential
impairment when circumstances indicate that the carrying value of the asset may be greater than its
estimated future net cash flows. The evaluations involve significant judgment since the results
are based on estimated future events, such as inflation rates, future sales prices for oil and
natural gas, future production costs, estimates of future oil and natural gas reserves to be
recovered and the timing thereof, the economic and regulatory climates and other factors. The need
to test a property for impairment may result from significant declines in sales prices or
unfavorable adjustments to oil and natural gas reserves. Between periods in which reserves would
normally be calculated, the Company updates the reserve calculations utilizing updated projected
future
price decks current with the period. As of the quarter and nine months ended June 30, 2011, the
Company’s test for impairment resulted in a charge to impairment of $2,927 and $830,946,
respectively. As of the quarter and nine months ended June 30, 2010, the Company’s test for
impairment resulted in a charge to impairment of $0 and $12,370, respectively. A reduction in oil
and natural gas prices or a decline in reserve volumes could lead to additional impairment that may
be material to the Company.
|
Restricted Stock Plan
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Plan [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Plan |
NOTE 6: Restricted Stock Plan
On March 11, 2010, shareholders approved the Panhandle Oil and Gas Inc. 2010 Restricted Stock
Plan (2010 Stock Plan), which made available 100,000 shares of common stock to provide a long-term
component to the Company’s total compensation package for its officers and to further align the
interest of its officers with those of its shareholders. The 2010 Stock Plan is designed to
provide as much flexibility as possible for future grants of restricted stock so that the Company
can respond as necessary to provide competitive compensation in order to retain, attract and
motivate officers of the Company and to align their interests with those of the Company’s
shareholders.
In June 2010, the Company awarded 8,500 shares of the Company’s common stock as restricted
stock to certain officers. The restricted stock vests at the end of five years and contains
nonforfeitable rights to receive dividends and voting rights during the vesting period. The fair
value of the shares at the time of their award, based on the closing price of the shares on their
award date, was $240,550 and will be recognized as compensation expense ratably over the vesting
period.
On December 21, 2010, the Company awarded 8,780 shares of the Company’s common stock as
restricted stock to certain officers. The restricted stock vests at the end of three years and
contains nonforfeitable rights to receive dividends and voting rights during the vesting period.
The fair value of the shares at the time of their award, based on the closing price of the shares
on their award date, was $245,840 and will be recognized as compensation expense ratably over the
vesting period.
The impact of these awards on G&A expense in the quarter and nine months ended June 30, 2011
was $32,515 and $77,058, respectively. There was no such expense in the corresponding 2010
periods. As of June 30, 2011, there was $397,305 of total unrecognized compensation cost related
to these awards. The cost is to be recognized over a weighted
average period of 3.22 years. Upon vesting, shares are expected to be issued out of shares held in
treasury.
A summary of the status of unvested shares of restricted stock awards and changes during 2011
is presented below:
On December 21, 2010, the Company also awarded 8,782 shares of the Company’s common stock,
subject to certain share price performance standards, as restricted stock to certain officers.
Vesting of these shares is based on the performance of the market price of the common stock over
the vesting period (three years). The fair value of the performance shares was estimated on the
grant date using a Monte Carlo valuation model that factors in information, including the expected
price volatility, risk-free interest rate and the probable outcome of the market condition, over
the expected life of the performance shares. Compensation expense for the performance shares is a
fixed amount determined at the grant date and is recognized over the vesting period (three years)
regardless of whether performance shares are awarded at the end of the vesting period. The impact
of these awards on G&A expense in the quarter and nine months ended June 30, 2011 was $14,303 and
$28,606, respectively. As of June 30, 2011, there was $143,030 of total unrecognized compensation
cost related to this performance-based, restricted stock. The cost is to be recognized over a
weighted average period of 2.49 years.
|
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