-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CTdio5ezZZsnkChSgOvwmRxYj8VILR75xsZgrOHnnyWoPfrfb9i3c+A25uZhmMSP i6XNjA3v7jFqKlJh8syJYA== 0000950134-96-004093.txt : 19960813 0000950134-96-004093.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950134-96-004093 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 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: 96608672 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-Q QUARTER END JUNE 30, 1996 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, 1996 ------------------------------------------- ( ) 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 2, 1996: 675,020 ---------- 2 INDEX
Page Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 1996 (unaudited) and September 30, 1995.................................. 1 Condensed Consolidated Statements of Income - Three months and Nine Months ended June 30, 1996 and 1995 (unaudited).................. 2 Condensed Consolidated Statements of Cash Flows - Nine Months ended June 30, 1996 and 1995 (unaudited)......................................... 3 Notes to Condensed Consolidated Financial Statements (unaudited) ............................. 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, 1996 is unaudited)
June 30, September 30, ASSETS 1996 1995 ------ ------------------ -------------- Current Assets: Cash and cash equivalents $ 690,352 $ 443,862 Oil and gas sales and other receivables 773,303 587,911 Prepaid expenses 12,662 2,221 ------------------ -------------- Total current assets 1,476,317 1,033,994 Properties and equipment, at cost, based on successful efforts accounting: Producing Oil and Gas Properties 4,906,703 3,480,998 Nonproducing Oil and Gas Properties 17,102,384 15,285,738 Other 183,959 177,466 Less accumulated depreciation, depletion and amortization 13,311,070 12,328,527 ------------------ -------------- Net properties and equipment 8,881,976 6,615,675 Other assets 107,716 107,716 ------------------ -------------- $ 10,466,009 $ 7,757,385 ================== ============== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable, accrued liabilities and gas imbalance liability $ 296,890 $ 147,421 Dividends payable 28,306 62,088 Income taxes payable 50,000 -- Deferred income taxes 203,000 203,000 ------------------ -------------- Total current liabilities 578,196 412,509 Long-term debt 1,250,000 -- Deferred income taxes 996,700 710,000 Stockholders' equity: Class A voting common stock, $.10 par value; 1,000,000 shares authorized, 675,020 issued and outstanding at June 30, 1996 and 679,642 at September 30, 1995 67,502 67,964 Capital in excess of par value 324,592 400,334 Retained earnings 7,249,019 6,166,578 ------------------ -------------- Total stockholders' equity 7,641,113 6,634,876 ------------------ -------------- $ 10,466,009 $ 7,757,385 ================== ==============
(See accompanying notes) (1) 4 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended June 30, Nine Months Ended June 30, ---------------------------------------- ---------------------------------- 1996 1995 1996 1995 ----------------- ----------------- --------------- --------------- Revenues: Oil and gas sales $ 1,644,659 $ 830,546 $ 4,343,446 $ 2,194,188 Lease bonuses and rentals 5,806 389 14,363 8,401 Interest 6,209 12,510 18,234 38,670 Other 7,275 306 8,363 7,387 ----------------- ----------------- --------------- -------------- 1,663,949 843,751 4,384,406 2,248,646 Costs and expenses: Lease operating expenses, production taxes 265,244 184,037 743,873 489,487 Dry hole costs 17,580 54,615 95,712 247,146 Depreciation, depletion and amortization 418,725 154,003 982,543 498,590 General & administrative 179,706 168,484 664,457 595,135 Interest Expense 32,493 779 95,354 3,810 ----------------- ----------------- --------------- -------------- 913,748 561,918 2,581,939 1,834,168 Income before provision for income taxes 750,201 281,833 1,802,467 414,478 Provision for income taxes 220,000 -- 414,500 -- ----------------- ----------------- --------------- -------------- Net Income $ 530,201 $ 281,833 $ 1,387,967 $ 414,478 ================= ================= =============== ============== Net income per share of common stock $ .78 $ .42 $ 2.05 $ .61 ================= ================= =============== ============== Dividends declared per share of common stock $ .15 $ .15 $ .45 $ .45 ================= ================= =============== ============== Weighted average shares outstanding 676,283 676,196 678,453 677,164 ================= ================= =============== ==============
(See accompanying notes) (2) 5 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months ended June 30, ------------------------------------------ 1996 1995 ---------------- ----------------- Cash flows from operating activities: Net income $ 1,387,967 $ 414,478 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 982,543 498,590 Cash provided (used) by changes in assets and liabilities: Oil and gas sales and other receivables ( 185,392) ( 40,480) Prepaid expenses and other assets ( 10,441) ( 47,754) Income taxes payable 50,000 ( 68,449) Deferred income taxes 286,700 -- Accounts payable, accrued liabilities and dividends payable 115,687 45,654 -------------- ---------------- Total adjustments 1,239,097 387,561 -------------- ---------------- Net cash provided by operating activities 2,627,064 802,039 Cash flows from investing activities: Purchases of and development of properties and equipment (3,248,844) (1,084,192) -------------- ---------------- Net cash used in investing activities (3,248,844) (1,084,192) Cash flows from financing activities: Loan proceeds 2,100,000 -- Payment of loan principal ( 850,000) -- Acquisition of the Company's common shares ( 76,204) ( 29,478) Payment of dividends ( 305,526) ( 306,224) -------------- ---------------- Net cash provided (used) in financing activities 868,270 ( 335,702) -------------- ---------------- Increase (decrease) in cash and cash equivalents 246,490 ( 617,855) Cash and cash equivalents at beginning of period 443,862 1,099,668 -------------- ---------------- Cash and cash equivalents at end of period $ 690,352 $ 481,813 ============== ================ Supplemental disclosures of cash flow information: Interest paid $ 95,354 $ 3,810 Income taxes paid $ 77,800 $ 79,703 -------------- ---------------- $ 173,154 $ 83,513 ============== ================
(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, 1996 and 1995 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. The Company utilizes 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. The Company purchased and retired 4,393 shares of stock during the third quarter. These were unclaimed shares resulting from the merger of New Mexico Osage Royalty Company into Panhandle in 1988. 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. At August 5, 1996, the Company had $1,050,000 outstanding under the facility. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, working capital was $898,121 as compared to $621,485 at September 30, 1995. Cash and cash equivalents were $690,352 as compared to $443,862 at September 30, 1995. Cash flow provided by operating activities for the nine-month period ended June 30, 1996 was $2,627,064 as compared to $802,039 for the nine-month period ended June 30, 1996. The increase in cash flow is the result of increased oil and gas sales revenues in the 1996 period as compared to the 1995 period. The Company continues to increase its expenditures for the purchase of and development of its oil and gas properties. Expenditures for the 1996 nine-month period totaled $3,248,844 as compared to $1,084,192 in the comparable 1995 period. $2,115,000 of the 1996 expenditures were used to purchase a 50% interest in 65,632 net mineral acres located principally in Oklahoma and Texas. This purchase was funded by accessing the Company's line-of-credit for $2,100,000. The properties are principally non-producing, however they should add approximately $150,000 to cash flow during fiscal 1996, before consideration of interest expense on the loan. The Company intends to actively pursue development of these properties by participating in drilling of additional wells on the properties. At June 30, 1996 the Company had commitments for ongoing and proposed drilling and equipment costs on new wells totaling $871,000. These costs, as well as Company operating costs for the remaining three months of fiscal 1996 are expected to be funded from cash flow and available working capital. In addition, the Company anticipates having sufficient cash available to make substantial principal payments on the bank line-of-credit. However, as the principal amount of the line-of-credit is not due and payable until 1998, should cash flow be lower than expectations or should the Company make another large asset purchase, principal payments could be scaled back and/or the line of credit could be accessed. The Company feels the line of credit can be substantially increased over $2,500,000, if necessary. (4) 7 RESULTS OF OPERATIONS Revenues increased substantially for both the three-month and nine-month periods ended June 30, 1996 as compared to the comparable periods in 1995. The increases were the result of oil and gas sales revenues increasing $814,113, 98%, for the three-month period and $2,149,258, 98%, for the nine-month period. The increases are the result of increased sales volumes and sales prices for both natural gas and oil. The chart below outlines the Company's production and average sales prices for oil and natural gas for the three- month and nine-month periods of fiscal 1995 and 1996.
BARRELS AVERAGE MCF AVG SOLD PRICE SOLD PRICE ------- ---------- ---------- ----------- Three months ended 06/30/96 38,706 $ 21.61 404,169 $ 2.00 Three months ended 06/30/95 23,879 $ 18.25 281,211 $ 1.42 Nine months ended 06/30/96 112,154 $ 19.36 1,178,546 $ 1.86 Nine months ended 06/30/95 53,719 $ 17.47 872,580 $ 1.44
The increases in sales volumes and sales prices of natural gas are principally due to a cold winter in 1995-1996 and the resulting increased demand for natural gas. The increase in oil sales volume continues to be in large part the result of new wells coming on line in the Daggar Draw Field of New Mexico. This field is the Company's largest oil producing field, and there continues to be development drilling in the field. The Company anticipates additional wells will be completed and begin producing in the field during the next two years. Also adding somewhat to this oil volume increase were increases in West Texas reef and Louisiana Wilcox sand production. Management expects oil production volumes and gas production volumes to remain relatively stable for the remainder of fiscal 1996. Costs and expenses increased $351,830 in the 1996 quarter as compared to the 1995 quarter and increased $747,771 in the 1996 nine-month period as compared to the 1995 nine-month period. In both the three-month and nine-month periods of 1996 lease operating expenses and production taxes, depreciation, depletion and amortization (DD&A), general and administrative costs and interest expense all increased, while dry hole costs decreased. Lease operating expenses and production taxes were higher due to severence taxes paid on the increased oil and gas sales revenues in the 1996 periods. Workover costs in the 1996 periods on wells in Louisiana and New Mexico and the continuing increase in the number of working interest wells further increased lease operating costs. DD&A increased in the 1996 period as the Company computes DD&A on the units of production method, which caused increased DD&A costs as production levels increased in 1996. In addition, several wells were deemed marginal producers in 1996 and DD&A rates were increased on those wells. General and administrative costs increased due to increased salary levels, increased legal costs and higher insurance costs. Interest expense was increased in the 1996 periods as the Company borrowed $2,100,000 in the first quarter of fiscal 1996 to make the property acquisition discussed above. Until that time, the Company had no debt. Management expects costs and expenses will remain higher than 1995 levels for the remainder of fiscal 1996. Dry hole costs were the only costs lower in fiscal 1996 than 1995. These costs will vary from quarter to quarter. The Company will continue drilling exploratory wells, which, if nonproductive result in dry hole costs. (5) 8 The provision for income taxes in the 1996 periods were substantially higher due to the significant increase in income before taxes. However, the provision for taxes continues to be favorably affected by tax credits available from the production of "tight gas sands" natural gas. Net income and net income per share were both substantially increased for the three-month and nine-month periods of 1996, as compared to the 1995 periods. The increases are a result of increased oil and gas sales volumes and sales prices, somewhat offset by increased costs and expenses. Sales volumes are expected to remain at an increased level for both natural gas and oil and sales prices for gas and oil are expected to remain relatively stable for the remainder of fiscal 1996. Thus, management expects financial results to continue to show improvement over 1995 levels. However, should any of the Company's exploratory drilling projects result in dry holes or should gas and/or oil prices drop dramatically, earnings would be negatively impacted. 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, 1996. 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 12, 1996 /s/ H W Peace II - ----------------- ------------------------------------ Date H. W. Peace II, President August 12, 1996 /s/ Michael C. Coffman - ----------------- ------------------------------------ Date Michael C. Coffman, Vice President, Chief Financial Officer and Secretary and Treasurer (6) 9 INDEX TO EXHIBITS
Exhibit No. Description - ------- ----------- EX-27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS SEP-30-1996 OCT-01-1995 JUN-30-1996 690,352 0 773,303 0 0 1,476,317 22,193,046 13,311,070 10,466,009 578,196 0 67,502 0 0 7,573,611 10,466,009 4,343,446 4,384,406 743,873 1,742,712 0 0 95,354 1,802,467 414,500 1,387,967 0 0 0 1,387,967 2.05 2.05
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