-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WvJI51VUaJDgzVQsYeGFDksvABIk3gzRE9AI4gI1/UPhOs/dIxryvXiXQa+VC5LW CwFFkzubNkSAH0JN2wBQQA== 0000950134-95-000988.txt : 19950512 0000950134-95-000988.hdr.sgml : 19950512 ACCESSION NUMBER: 0000950134-95-000988 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950511 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PANHANDLE ROYALTY CO CENTRAL INDEX KEY: 0000315131 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731055775 STATE OF INCORPORATION: OK FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-09116 FILM NUMBER: 95536587 BUSINESS ADDRESS: STREET 1: 5400 NW GRAND BLVD STREET 2: GRAND CENTRE STE 210 CITY: OKLAHOMA CITY STATE: OK ZIP: 73112 BUSINESS PHONE: 4059481560 10QSB 1 FORM 10-QSB PERIOD ENDED 3-31-95 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB ( X ) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended March 31, 1995 ------------------------------------------- ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ------------------ --------------------- Commission File Number 0-9116 --------------------------------------------------------- PANHANDLE ROYALTY COMPANY - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) OKLAHOMA 73-1055775 - -------------------------------------- -------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Grand Centre Suite 210, 5400 NW Grand Blvd., Okla. City, Oklahoma 73112 - -------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number including area code (405) 948-1560 ------------------------------ 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes No --- --- Outstanding shares of Class A Common stock (voting) at May 4, 1995: 671,697 2 INDEX
Page Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 1995 (unaudited) and September 30, 1994.................................. 1 Condensed Consolidated Statements of Income - Three months and six months ended March 31, 1995 and 1994 (unaudited)................. 2 Condensed Consolidated Statements of Cash Flows - Six months ended March 31, 1995 and 1994 (unaudited)......................................... 3 Notes to Condensed Consolidated Financial Statements.......................................... 4 Item 2. Management's discussion and analysis of financial condition and results of operations................. 4 Part II. Other Information Item 4. Submission of matters to a vote of security holders............................................. 7 Item 6. Exhibits and reports on Form 8-K.................... 7
3 PART I. FINANCIAL INFORMATION PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Information at March 31, 1995 is unaudited)
March 31, September 30, ASSETS 1995 1994 ------ ------------ ------------ Current Assets: Cash and cash equivalents $ 749,803 $ 1,099,668 Oil and gas sales and other receivables 381,734 423,006 Prepaid expenses 7,822 3,463 -------------- ----------- Total current assets 1,139,359 1,526,137 Properties and equipment, at cost, based on successful efforts accounting 18,110,835 17,502,928 Less accumulated depreciation, depletion and amortization 11,968,833 11,627,946 -------------- ----------- Net properties and equipment 6,142,002 5,874,982 Other assets 87,163 62,163 -------------- ----------- $ 7,368,524 $ 7,463,282 ============== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable and accrued liabilities $ 167,339 $ 123,568 Dividends payable 61,596 59,012 Income taxes payable 25,463 68,449 Deferred income taxes 149,000 149,000 -------------- ----------- Total current liabilities 403,398 400,029 Deferred income taxes 625,000 625,000 Stockholders' equity Class A voting common stock, $.10 par value; 1,000,000 shares authorized, 676,399 issued and outstanding at March 31,1995 and 678,136 at September 30, 1994 67,640 67,814 Capital in excess of par value 345,045 370,904 Retained earnings 5,927,441 5,999,535 -------------- ----------- Total stockholders' equity 6,340,126 6,438,253 -------------- ----------- $ 7,368,524 $ 7,463,282 ============== ===========
(See accompanying notes) (1) 4 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Mar 31, Six Months Ended Mar 31, --------------------------------- ------------------------------ 1995 1994 1995 1994 ------------ -------------- ------------ ------------ Revenues: Oil and gas sales $ 687,442 $ 993,673 $ 1,363,642 $ 1,914,560 Lease bonuses and rentals (2,327) 9,847 8,012 23,609 Interest 13,868 3,789 26,160 8,255 Other 6,698 477 7,081 3,824 ------------ ----------- ----------- ----------- 705,681 1,007,786 1,404,895 1,950,248 Costs and expenses: Lease operating expenses, production taxes and seismic costs 157,381 171,896 305,450 362,917 Dry hole costs 163,055 15,678 192,531 54,428 Depreciation, depletion and amortization 184,519 311,710 344,587 542,040 General & administrative 184,523 184,465 429,682 430,814 ------------ ----------- ----------- ----------- 689,478 683,749 1,272,250 1,390,199 ------------ ----------- ----------- ----------- Income before provision for income taxes and the cumulative effect of accounting change 16,203 324,037 132,645 560,049 Provision for income taxes -- 24,987 -- 34,187 ------------ ----------- ----------- ----------- Income before the cumulative effect of accounting change 16,203 299,050 132,645 525,862 Less cumulative effect on prior years of change in method of accounting for income taxes -- -- -- 37,000 ------------ ----------- ----------- ----------- Net Income $ 16,203 $ 299,050 $ 132,645 $ 488,862 ============ =========== =========== =========== Per share of common stock: Income before the cumulative effect of accounting change $ .02 $ .44 $ .20 $ .78 Less cumulative effect of accounting change $ -- $ -- $ -- $ .06 ------------ ----------- ----------- ----------- Net income per share $ .02 $ .44 $ .20 $ .72 ============ =========== =========== =========== Dividends declared per share of common stock $ .15 $ .125 $ .30 $ .25 ============ =========== =========== =========== Weighted average shares outstanding 677,424 674,654 677,702 674,710 ============ =========== =========== ===========
(See accompanying notes) (2) 5 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six-Months ended March 31, ------------------------------ 1995 1994 ----------- ----------- Cash flows from operating activities: Net income $ 132,645 $ 488,862 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 344,587 542,040 Cash provided (used) by changes in assets and liabilities: Oil and gas sales and other receivables 41,272 ( 65,099) Prepaid expenses and other assets ( 29,359) ( 27,533) Income taxes payable ( 42,986) ( 108,906) Accounts payable, accrued liabilities and dividends payable 46,355 ( 35,875) Cumulative effect on prior years of change in method of accounting for income taxes -- 37,000 ---------- ----------- Total adjustments 359,869 341,627 ---------- ----------- Net cash provided by operating activities 492,514 830,489 Cash flows from investing activities: Purchases of and development of properties and equipment ( 611,607) ( 576,752) ---------- ----------- Net cash used in investing activities ( 611,607) ( 576,752) Cash flows from financing activities: Acquisition of the Company's common stock ( 26,033) ( 7,815) Payment of dividends ( 204,739) ( 168,676) ---------- ----------- Net cash used in financing activities ( 230,772) ( 176,491) ---------- ----------- Increase (decrease) in cash and cash equivalents ( 349,865) 77,246 Cash and cash equivalents at beginning of period 1,099,668 550,830 ---------- ----------- Cash and cash equivalents at end of period $ 749,803 $ 628,076 ========== ===========
(See accompanying notes) (3) 6 PANHANDLE ROYALTY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The consolidated results presented for the three-month and six-month periods ended March 31, 1995 and 1994 are unaudited, but management of Panhandle Royalty Company believes that all adjustments necessary for a fair presentation of the consolidated results of operations 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. 2. During the first quarter of fiscal 1994 the Company adopted FASB Statement No. 109 "Accounting for Income Taxes". The effect of adopting Statement 109 was to decrease first quarter 1994 earnings by $37,000 or $.06 per share, and increase the deferred income tax liability. As permitted under the new rules, prior years' financial statements have not been restated. The Company continues to utilize tight gas sands production tax credits to reduce its federal income tax liability. These credits are scheduled to be available through the year 2002. 3. Earnings per share of common stock are computed using the weighted average number of shares outstanding during the period. 4. The Company has a revolving line of credit with Bank One, Texas, in the amount of $2,500,000. The credit matures on January 3, 1997. Currently, the Company has not borrowed funds under the facility. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES At March 31, 1995, working capital was $735,961 as compared to $1,126,108 at September 30, 1994. Cash and cash equivalents were $749,803 at March 31, 1995 as compared to $1,099,668 at September 30, 1994. The Company continued to invest its cash flow, and a portion of its cash reserves, in the development of its oil and gas properties and in purchasing additional mineral acreage. Cash provided by operating activities was $492,514 for the six months ended March 31, 1995 as compared to $830,489 for the six months ended March 31, 1994. The decrease in cash provided by operating activities was due to decreased oil and gas sales revenues and the resulting decrease in net income for the 1995 six months as compared to the 1994 six months. Oil and gas revenues decreased as a result of lower oil and gas sales volumes, and a decreased sales price for natural gas. Expenditures for the purchase and/or development of oil and gas properties amounted to $611,607 in the 1995 six months as compared to $576,752 in the 1994 six months. The Company continued to be active in the drilling of wells and purchasing of fee mineral acreage. Increased spending on oil and gas activities was principally the result of an increased amount spent for fee mineral acreage purchases, somewhat offset by decreased spending on drilling and equipment costs of wells in the 1995 period as compared to the 1994 period. Management anticipates drilling costs will slightly increase for the remainder of 1995, as compared to the first six months, and that mineral acreage purchases will decline. (4) 7 Expected capital costs for the remainder of fiscal 1995, including drilling and equipment costs for wells and fee mineral acreage purchases, will be funded from expected cash flow and available cash reserves. The Company does not anticipate incurring debt for the above expenditures. Should a large acquisition opportunity arise a $2,500,000 line of credit is available. Commitments for proposed and ongoing well drilling and equipment costs at March 31, 1995 were approximately $616,000. The majority of these costs will be paid in the next six to nine months. However, additional drilling commitments are anticipated during the next six months as new wells are proposed. Management expects natural gas prices to remain depressed for at least the remainder of fiscal 1995. As a result of these low gas prices the Company and well operators have periodically "shut in" gas production on certain of its wells when gas sales prices for those specific wells are deemed inadequate. In addition to the low prices the resulting reduced volumes of gas and condensate (oil) production which normally accompanies the gas have impacted revenues and cash flow. This "shut in" gas will be available for sale at a later date when prices are deemed adequate. Low natural gas sales prices will continue to have a negative impact on cash flow and cash available, however, the Company has adequate cash reserves should cash flow not be sufficient to fund capital expenditures and operating costs for the remainder of 1995. RESULTS OF OPERATIONS Total revenues decreased for both the three-month and six-month periods ended March 31, 1995 as compared to the comparable periods in 1994. Oil and gas sales revenues decreased $306,231 or 31% for the three-month period and $550,918 or 29% for the six-month period. The decreases are the result of lower sales volumes for both natural gas and oil, a lower average sales price for natural gas and somewhat offset by an increased average sales price for oil.
BARRELS AVERAGE MCF AVG SOLD PRICE SOLD PRICE ------- ------- ------ ----- Three months ended 03/31/95 15,649 $17.00 275,226 $1.54 Three months ended 03/31/94 22,570 $13.97 329,690 $2.01 Six months ended 03/31/95 29,840 $16.84 591,064 $1.46 Six months ended 03/31/94 36,703 $15.03 680,261 $1.98
As can be seen from the chart the decrease in oil and gas revenues was caused by both volume and price decreases. Gas volume decreases are principally the result of the Company or well operators "shutting in" or not producing certain gas wells due to low gas sales prices. Oil volume decreases in the 1995 periods are the result of the 1994 periods experiencing initial flush production volumes from several oil wells in New Mexico. These wells' oil production volumes have now leveled off to lower, sustainable levels. As the majority of the Company's revenues (63%) are derived from natural gas sales and as gas prices are expected to remain depressed for the remainder of fiscal 1995, management expects fiscal 1995 revenues will be lower than 1994 levels. Costs and expenses increased $5,729 in the 1995 quarter as compared to the 1994 quarter and decreased $117,949 in the 1995 six-month period as compared to the 1994 six-month period. The only expenses changing significantly during either the three-month or six-month periods were depreciation, depletion and (5) 8 amortization (DD&A) and dry hole costs. As the Company computes DD&A on the units of production method, D&A was reduced by the lower production volumes experienced in fiscal 1995. In addition, several marginal producing wells' DD&A rates were increased in the 1994 periods, thus increasing 1994 DD&A expense. 1995 three-month period dry hole costs were significantly increased, as compared to the 1994 period, as the Company participated in the drilling of more wells which resulted in dry holes. Two of these wells resulted in costs of approximately $149,000 being charged to dry hole costs in the three-month period ended March 31, 1995. Lease operating expenses, production taxes and seismic costs were somewhat lower for both the three-month period and six-month period of 1995 as compared to the 1994 periods. Production taxes are lower as they are calculated as a percentage of oil and gas sales revenues, and as discussed above oil and gas revenues are lower in the 1995 periods which reduced production taxes paid. In addition, seismic costs were approximately $32,000 less in the 1995 six-month period as compared to the 1994 six-month period. The provision for income taxes in 1995 continues to be favorably affected by tax credits available for the production of "tight gas sands" gas production. These credits coupled with reduced earnings resulted in no provision for income taxes for the first six months of 1995. The Company adopted FASB Statement No. 109 "Accounting for Income Taxes" in the first quarter of 1994. The implementation resulted in a one-time cumulative effect charge to current earnings of $37,000. Net income and net income per share both decreased for the three-month and six-month periods in 1995 as compared to 1994. As discussed above, the decreases are the result of decreased oil and gas sales revenues in each period of 1995 as compared to 1994 and increased dry hole costs in the 1995 three-month period. These higher costs were somewhat offset by decreased DD&A expenses. Management does not anticipate a dramatic turnaround in natural gas sales prices during the remainder of fiscal 1995, thus the negative impact on net income from reduced gas sales volumes and gas sales prices is expected to continue through the remainder of fiscal 1995. (6) 9 PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The annual meeting of shareholders was held on February 24, 1995. (b) Two directors were elected at the meeting. Also, ratification of the selection of Ernst & Young LLP as independent auditors for the Company was voted upon. The directors elected and the results of voting were as follows:
VOTES ------------------------------------------- For Against Withheld ----- ------- -------- Directors --------- Dean Brown 868 21 Michael A. Cawley 861 28 Auditors -------- Ernst & Young LLP 862 6 21
Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - Exhibit 27 -- Financial Data Schedule. (b) There were no reports on FORM 8-K filed for the three months ended March 31, 1995. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PANHANDLE ROYALTY COMPANY May 12, 1995 /s/ H W Peace II - ----------------- ---------------------------------- Date H. W. Peace II, President May 12, 1995 /s/ Michael C. Coffman - ----------------- ---------------------------------- Date Michael C. Coffman, Vice President, Secretary and Treasurer (7) 10 INDEX TO EXHIBITS
Exhibit Description - ------- ----------- 27 Financial Data Schedule
EX-27 2 FIANANCIAL DATA SCHEDULE
5 6-MOS SEP-30-1995 OCT-01-1994 MAR-31-1995 749,803 0 381,734 0 0 1,139,359 18,110,836 11,968,833 7,368,524 403,398 0 67,640 0 0 6,272,486 7,368,524 1,363,642 1,404,895 305,450 1,272,250 0 0 0 132,645 0 132,645 0 0 0 132,645 .20 .20
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