-----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, Mgf1eSwQq3RmgHqbuiBCAOs7sHWMftH6TXQCuE5pbah81jZDn0rQl/9Fe4PHvjvX k0+VMGn5AaftMGFOI0/AhA== 0000950134-95-001886.txt : 19950814 0000950134-95-001886.hdr.sgml : 19950814 ACCESSION NUMBER: 0000950134-95-001886 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 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: 95561502 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 10QSB 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 June 30, 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 August 4, 1995: 671,697 2 INDEX
Page Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 1995 (unaudited) and September 30, 1994.................................. 1 Condensed Consolidated Statements of Income - Three months and nine months ended June 30, 1995 and 1994 (unaudited).................. 2 Condensed Consolidated Statements of Cash Flows - Nine months ended June 30, 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 6. Exhibits and reports on Form 8-K.................... 6
3 PART I. FINANCIAL INFORMATION PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Information at June 30, 1995 is unaudited)
June 30, September 30, 1995 1994 ------------- ------------- ASSETS ------ Current Assets: Cash and cash equivalents $ 481,813 $ 1,099,668 Oil and gas sales and other receivables 463,486 423,006 Prepaid expenses 5,664 3,463 ------------- ------------- Total current assets 950,963 1,526,137 Properties and equipment, at cost, based on successful efforts accounting 18,580,660 17,502,928 Less accumulated depreciation, depletion and amortization 12,120,076 11,627,946 ------------- ------------- Net properties and equipment 6,460,584 5,874,982 Other assets 107,716 62,163 ------------- ------------- $ 7,519,263 $ 7,463,282 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable and accrued liabilities $ 166,146 $ 123,568 Dividends payable 62,088 59,012 Income taxes payable -- 68,449 Deferred income taxes 149,000 149,000 ------------- ------------- Total current liabilities 377,234 400,029 Deferred income taxes 625,000 625,000 Stockholders' equity: Class A voting common stock, $.10 par value; 1,000,000 shares authorized, 676,169 issued and outstanding at June 30, 1995 and 678,136 at September 30, 1994 67,617 67,814 Capital in excess of par value 341,623 370,904 Retained earnings 6,107,789 5,999,535 ------------- ------------- Total stockholders' equity 6,517,029 6,438,253 ------------- ------------- $ 7,519,263 $ 7,463,282 ============= =============
(See accompanying notes) (1) 4 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended June 30, Nine Months Ended June 30, ------------------------------ -------------------------------- 1995 1994 1995 1994 ----------- ------------- ------------- ------------ Revenues: Oil and gas sales $ 830,546 $ 1,089,790 $ 2,194,188 $ 3,004,350 Lease bonuses and rentals 389 12,269 8,401 35,879 Interest 12,510 5,800 38,670 14,055 Other 306 81 7,387 3,905 ----------- ------------- ------------- ------------ 843,751 1,107,940 2,248,646 3,058,189 Costs and expenses: Lease operating expenses, production taxes and seismic costs 184,037 200,360 489,487 563,277 Dry hole costs 54,615 19,785 247,146 74,214 Depreciation, depletion and amortization 154,003 265,341 498,590 807,381 General & administrative 169,263 170,124 598,945 600,938 ----------- ------------- ------------- ------------ 561,918 655,610 1,834,168 2,045,810 ----------- ------------- ------------- ------------ Income before provision for income taxes and the cumulative effect of accounting change 281,833 452,330 414,478 1,012,379 Provision for income taxes -- 72,000 -- 106,187 ----------- ------------- ------------- ------------ Income before the cumulative effect of accounting change 281,833 380,330 414,478 906,192 Less cumulative effect on prior years of change in method of accounting for income taxes -- -- -- 37,000 ----------- ------------- ------------- ------------ Net Income $ 281,833 $ 380,330 $ 414,478 $ 869,192 =========== ============= ============= ============ Per share of common stock: Income before the cumulative effect of accounting change $ .42 $ .56 $ .61 $ 1.34 Less cumulative effect of accounting change $ - $ -- $ -- $ .05 =========== ============= ============= ============ Net income per share $ .42 $ .56 $ .61 $ 1.29 =========== ============= ============= ============ Dividends declared per share of common stock $ .15 $ .125 $ .45 $ .375 =========== ============= ============= ============ Weighted average shares outstanding 676,196 674,614 677,164 674,678 =========== ============= ============= ============
(See accompanying notes) (2) 5 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine-Months ended June 30, -------------------------------- 1995 1994 ---------- ------------ Cash flows from operating activities: Net income $ 414,478 $ 869,192 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 498,590 807,381 Cash provided (used) by changes in assets and liabilities: Oil and gas sales and other receivables (40,480) (63,882) Prepaid expenses and other assets (47,754) (19,655) Income taxes payable (68,449) (108,906) Accounts payable, accrued liabilities and dividends payable 45,654 (8,703) Cumulative effect on prior years of change in method of accounting for income taxes -- 37,000 ---------- ------------ Total adjustments 387,561 643,235 ---------- ------------ Net cash provided by operating activities 802,039 1,512,427 Cash flows from investing activities: Purchases of and development of properties and equipment (1,084,192) (794,320) ---------- ------------ Net cash used in investing activities (1,084,192) (794,320) Cash flows from financing activities: Acquisition of the Company's common stock (29,478) (7,815) Payment of dividends (306,224) (259,705) ---------- ------------ Net cash used in financing activities (335,702) (267,520) ---------- ------------ Increase (decrease) in cash and cash equivalents (617,855) 450,587 Cash and cash equivalents at beginning of period 1,099,668 550,830 ---------- ------------ Cash and cash equivalents at end of period $ 481,813 $ 1,001,417 ========== ============
(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 nine-month periods ended June 30, 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 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, 1998. 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 RESOURCE At June 30, 1995, working capital was $573,729 as compared to $1,126,108 at September 30, 1994. Cash and cash equivalents were $481,813 as compared to $1,099,668 at September 30, 1994. The decrease in working capital and cash and cash equivalents is principally the result of two factors. One, oil and gas revenues are substantially lower thus far in fiscal 1995 as compared to fiscal 1994 and, two, expenditures for purchases and development of oil and gas properties and equipment have substantially increased. Cash flow from operating activities in fiscal 1995 was $802,039 for the 1995 nine months as compared to $1,512,427 for the 1994 nine months. The decreased cash flow is the result of decreased oil and gas sales revenues. Expenditures for the purchase and/or development of oil and gas properties amounted to $1,084,192 in the 1995 nine-month period as compared to $794,320 in the 1994 nine-month period. This increase of $289,872 was attributable to increased amounts spent on drilling and equipping new wells and purchasing additional fee mineral acreage. In addition to the above amounts $247,146 was spent drilling wells that were not economic producers in fiscal 1995 as compared to $74,214 in the 1994 period. All these expenditures were funded from cash flow and existing cash reserves. Management anticipates drilling costs will continue at approximately this same relative level in the fourth quarter of fiscal 1995, however expenditures for mineral acreage purchases are expected to be substantially reduced. (4) 7 Capital costs for the remainder of fiscal 1995, including drilling and equipment costs for wells and fee mineral acreage purchases, if any, will be funded from expected cash flow and available cash reserves. Should a large mineral acquisition be consummated, the Company would access its $2,500,000 line of credit to fund the purchase. Commitments for proposed and ongoing well drilling and equipment costs at June 30, 1995 were approximately $601,000. The majority of these costs will be paid over the next three to six months. During this same time period, additional drilling commitments are anticipated as new wells are proposed. Management expects natural gas prices to remain depressed for the remainder of fiscal 1995 and into fiscal 1996. These low gas prices will reduce cash flow. In addition some producing well operators have selectively "shut in" gas production on certain wells due to the low gas prices. This "shut in" gas will be sold when gas prices are higher, however cash flow will be affected while the wells are "shut in". Thus, management expects cash flow for the remainder of fiscal 1995 to remain depressed, however the Company has adequate cash reserves should cash flow not be sufficient to fund anticipated capital expenditures and operating costs. RESULTS OF OPERATION Total revenues decreased for both the three-month and nine-month periods ended June 30, 1995 as compared to the same periods in 1994. Oil and gas sales revenues decreased $810,162 or 27% for the nine-month period and $259,244 or 24% for the three-month period. The decreases are mainly a result of lower sales volumes and lower sales prices for natural gas in both 1995 periods, as compared to the same periods in fiscal 1994.
PRODUCTION ----------------------------------------------------- OIL GAS ---------------------- --------------------- TOTAL AVERAGE TOTAL AVERAGE BARRELS PRICE MCF PRICE ------- ------- ---------- ------- Nine months ended 06/30/95 53,719 $17.47 872,580 $1.44 Nine months ended 06/30/94 61,566 $15.80 1,032,859 $1.96 Three months ended 06/30/95 23,879 $18.25 281,211 $1.42 Three months ended 06/30/94 24,863 $16.92 352,598 $1.93
The sales price and production volume decreases combined to reduce gas sales revenues 37% for the 1995 nine- month period and 41% for the 1995 three-month period as compared to the 1994 periods. Oil sales revenues were basically flat as the average sales price per barrel increase in the 1995 periods made up for the production decreases of the 1995 periods. The Company expects oil and gas sales revenues to remain relatively flat for the remainder of fiscal 1995 and to increase moderately as the winter heating season increases gas sales prices and volumes. Costs and expenses decreased for both the three-month and nine-month periods ended June 30, 1995 as compared to the same 1994 periods. The decreases amounted to $93,692 for the three-month period and $211,642 for the nine-month period. Individual cost and expense items changing significantly were dry hole costs and depreciation, depletion and amortization (DD&A). Dry hole costs increased both in the three-month and nine-month periods of 1995 as compared to the same periods in 1994. (5) 8 The Company has participated in the drilling of more exploratory wells in 1995, and one well drilled in the second quarter of 1995 accounts for over $100,000 of the total dry hole costs for the nine-months. As the Company continues to be more aggressive drilling exploratory wells the chances of incurring dry hole costs have increased. There is no way to accurately predict dry hole costs, however, as the Company will continue to aggressively participate in exploratory wells, along with development wells, it is expected that dry hole costs will continue at an increased level, as compared to recent years. DD&A expense decreased in each 1995 period as compared to the corresponding 1994 periods. The company computes DD&A on the units of production method, thus the lower production volumes in 1995 have reduced DD&A expense. In addition, several marginal producing wells DD&A rates were increased in the 1994 periods due to anticipated reserve volume reductions. Lease operating expenses, production taxes and seismic costs were also lower in the 1995 periods as compared to the 1994 periods. Production taxes 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. 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 nine 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 nine month periods in 1995 as compared to the 1994 periods. As discussed above, the decreases are the result of depressed oil and gas sales revenues somewhat offset by lower costs and 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. PART II. OTHER INFORMATION 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 June 30, 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 August 11, 1995 /s/ H W Peace II - -------------------- ------------------------------- Date H. W. Peace II, President August 11, 1995 /s/ Michael C. Coffman - -------------------- ------------------------------- Date Michael C. Coffman, Vice President, Secretary and Treasurer
(6) 9 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 Financial Data Schedule.
EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS SEP-30-1995 OCT-1-1994 JUN-30-1995 481,813 0 463,486 0 0 950,963 18,580,660 12,120,076 7,519,263 377,234 0 67,617 0 0 6,449,412 7,519,263 2,194,188 2,248,646 489,487 1,834,168 0 0 0 414,478 0 414,478 0 0 0 414,478 .61 .61
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