-----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, IY19/XSIKRdnFykdzDL6DN5SlqqMlySVarx6lLgKETVRjwCA0g67eud+/9AwWWf1 U90uXOS+CJ+tuL9WJ/rlXg== 0000950134-98-001258.txt : 19980218 0000950134-98-001258.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950134-98-001258 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980217 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: SEC FILE NUMBER: 000-09116 FILM NUMBER: 98540715 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 FOR QUARTER ENDED DECEMBER 31, 1997 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 December 31, 1997 ------------------------------------------------- ( ) 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 N Grand Blvd., Oklahoma 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 February 6, 1998: 679,820 ------- 2 INDEX
Page Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - December 31, 1997 (unaudited) and September 30, 1997 ............................................. 1 Condensed Consolidated Statements of Income Three months ended December 31, 1997 and 1996 (unaudited) .................................................... 2 Condensed Consolidated Statements of Cash Flows - Three Months ended December 31, 1997 and 1996 (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 December 31, 1997 is unaudited)
December 31, September 30, Assets 1997 1997 ------ ------------ ------------- Current Assets: Cash and cash equivalents $ 1,117,938 $ 872,797 Oil and gas sales and other receivables 1,101,084 893,779 Prepaid expenses 11,738 4,929 ----------- ----------- Total current assets 2,230,760 1,771,505 Properties and equipment, at cost, based on successful efforts accounting: Producing Oil and Gas Properties 20,480,512 20,063,953 Nonproducing Oil and Gas Properties 5,122,609 5,068,467 Furniture and fixtures 229,171 213,474 ----------- ----------- 25,832,292 25,345,894 Less accumulated depreciation, depletion and amortization 15,538,023 15,127,925 ----------- ----------- Net properties and equipment 10,294,269 10,217,969 Other assets 107,716 107,716 ----------- ----------- $12,632,745 $12,097,190 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable, accrued liabilities $ 276,555 $ 351,405 Gas imbalance liability 44,380 44,380 Dividends payable 30,256 29,856 Income taxes payable 272,162 112,336 Deferred income taxes 280,000 280,000 ----------- ----------- Total current liabilities 903,353 817,977 Deferred income taxes 1,247,000 1,247,000 Long-term debt -- -- Stockholders' equity: Class A voting common stock, $.10 par value; 1,000,000 shares authorized, 679,820 issued and outstanding at December 31 and September 30, 1997 67,982 67,982 Capital in excess of par value 445,306 445,306 Retained earnings 9,969,104 9,518,925 ----------- ----------- Total stockholders' equity 10,482,392 10,032,213 ----------- ----------- $12,632,745 $12,097,190 =========== ===========
(See accompanying notes) ( 1 ) 4 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Dec. 31 -------------------------- 1997 1996 ---- ---- Revenues: Oil and gas sales $1,809,769 $1,543,383 Lease bonuses and rentals 7,451 1,108 Interest 9,198 4,108 Other 521 8,940 ---------- ---------- 1,826,939 1,557,539 Costs and expenses: Lease operating expenses and production taxes 283,955 231,528 Exploration costs 59,389 160,980 Depreciation, depletion, amortization and impairment 369,061 226,864 General and administrative 362,993 341,320 Interest expense -- 14,745 ---------- ---------- 1,075,398 975,437 Income before provision for income taxes 751,541 582,102 Provision for income taxes 165,000 106,000 ---------- ---------- Net income $ 586,541 $ 476,102 ========== ========== Basic and diluted earnings per share (Note 3) $ .86 $ .70 ========== ========== Dividends declared per share of common stock $ .20 $ .20 ========== ==========
(See accompanying notes) ( 2 ) 5 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended Dec. 31 -------------------------------- 1977 1996 ----------- ----------- Cash flows from operating activities: Net income $ 586,541 $ 476,102 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 369,061 226,864 Exploration costs 59,389 160,980 Cash provided (used) by changes in assets and liabilities: Oil and gas sales and other receivables (207,305) (164,537) Prepaid expenses and other assets (6,809) (15,164) Income taxes payable 159,826 44,563 Accounts payable, accrued liabilities and dividends payable (74,449) 373 ----------- ----------- Total adjustments 299,714 253,079 ----------- ----------- Net cash provided by operating activities 886,254 729,181 Cash flows from investing activities: Purchase of and development of properties and equipment (504,749) (705,193) ----------- ----------- Net cash used in investing activities (504,749) (705,193) Cash flows from financing activities: Payment of loan principal -- (150,000) Payment of dividends (136,364) (135,970) ----------- ----------- Net cash used in financing activities (136,364) (285,970) ----------- ----------- Increase (Decrease) in cash and cash equivalents 245,141 (261,982) Cash and cash equivalents at beginning of period 872,797 399,423 ----------- ----------- Cash and cash equivalents at end of period $ 1,117,938 $ 137,441 =========== =========== Supplemental disclosure of cash flow information: Interest paid $ 796 $ 14,745 Income taxes paid 5,174 57,742 ----------- ----------- $ 5,970 $ 72,487 =========== ===========
(See accompanying notes) ( 3 ) 6 PANHANDLE ROYALTY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The consolidated results presented for the three-month period ended December 31, 1997 and 1996 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. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which was required to be adopted on December 31, 1997. Statement No. 128 required a change in the method used to compute earnings per share. The Company's diluted earnings per share calculation takes into account certain shares that may be issued under the Non-Employee Directors Deferred Compensation Plan. The following table sets forth the computation of basic and diluted earnings per share:
Three months ended Dec. 31 -------------------------- 1997 1996 -------- -------- Numerator for primary and diluted earnings per share: Net income $586,541 $476,102 -------- -------- Denominator: For basic earnings per share - Weighted average shares 679,820 677,846 Effect of potential dilutive shares: Directors deferred compensation shares 3,162 2,209 -------- -------- Denominator for diluted earnings per share - adjusted weighted - average shares and potential shares 682,982 680,055 ======== ======== Basic earnings per share $ .86 $ .70 ======== ======== Diluted earnings per share $ .86 $ .70 ======== ========
4. The Company has a revolving line of credit with Bank One, Texas, in the amount of $2,500,000. The credit facility matures on January 3, 2001. At February 6, 1998, the Company had no balance outstanding under the facility. 5. Certain reclassifications have been made in the financial statements for the period ended December 31, 1996 to conform to the financial statement presentation at December 31, 1997. ( 4 ) 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS All statements concerning the Company other than purely historical information (collectively "Forward-Looking Statements") provided herein are subject to all the risks and uncertainties incident to the acquisitions, development, and exploration for oil and gas reserves. These risks include, but are not limited to, oil and natural gas price risk, drilling risk, reserve quantity risk and operations and production risks. For all the above reasons, actual results may vary materially from any forward-looking statements and there is no assurance that the assumptions used are necessarily the most likely to occur. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1997, working capital was $1,327,407 as compared to $953,528 at September 30, 1997. Cash and cash equivalents were $1,117,938 at December 31, 1997. Cash flow provided by operating activities for the first quarter of 1998 was $886,256 as compared to $729,181 for the first quarter of 1997. The increase in cash flow and working capital is primarily attributable to increased oil and gas sales revenues in the 1998 first quarter. The Company continues its operating strategy of pursuing the development of its oil and gas properties through participations in the drilling of wells on its properties and by participating in third party wells on leased properties. However, due to the timing of the actual drilling operations of wells, the Company spent $504,752 on the development of its oil and gas properties during the 1998 first quarter as compared to $705,193 in the 1997 first quarter. At December 31, 1997 the Company had commitments of $1,480,985 for drilling and equipment costs for wells which had been proposed or were in the process of being drilled or completed. These expenditures, overhead expenses, dividend payments and other possible expenditures are expected to be funded by cash flow from operating activities and existing working capital. Should the Company require further funding for an assets purchase or other capital expenditures, it could access the $2,500,000 line of credit. RESULTS OF OPERATIONS Revenues increased in the fiscal 1997 three-month period ended December 31, 1997 by $269,400, or 17%, as compared to the same period in fiscal 1997. This growth in revenues was a result of increased oil and gas sales revenues, which were the result of a higher average sales price for natural gas and larger sales volumes of natural gas and oil, partially offset by a decrease in the average sales price of oil. The chart below outlines the Company's production and average sales prices for oil and natural gas for the first quarter of fiscal 1998 and 1997.
BARRELS AVERAGE MCF AVERAGE SOLD PRICE SOLD PRICE ---- ----- ---- ----- Quarter ended 12/31/97 31,612 $ 19.26 442,048 $ 2.72 Quarter ended 12/31/96 30,927 $ 23.61 370,846 $ 2.16
The increase in gas sales volumes in the 1998 quarter is the result of wells drilled in late fiscal 1997 being placed on production and adding additional production volumes in the 1998 quarter. The average gas sales price increase was the result of the early winter weather in the northeast part of the United States creating early demand for natural gas. Oil production volumes were stable but the average oil sales price decreased $4.35 per barrel, principally as a result of the unstable worldwide oil markets. Management currently expects both natural gas prices and oil prices to be somewhat lower for the remainder of fiscal 1998, as compared to the first quarter of 1998. Production volumes for the remainder of 1998 for oil are expected to be slightly lower and gas volumes should be moderately increased. Costs and expenses increased $99,961, or 10% in the 1998 period as compared to the 1997 period. The increase was principally attributable to increased lease operating expenses and production taxes (LOE), increased depreciation, depletion, amortization and impairment (DD&A) ( 5 ) 8 offset by decreased exploration costs. LOE expenses increased due to increased production taxes on the increased oil and gas sales revenues and the increasing number of working interest wells in which the Company owns an interest, thus shares in the operating costs. DD&A expenses increased due to the increased production volumes increasing units of production amortization, three wells depleting and their remaining costs being fully amortized and the recognizing of $30,000 of asset impairment costs in the 1998 quarter as compared to none in the 1997 quarter. Exploration costs decreased $101,591 in the 1998 quarter to somewhat offset the above increases. Exploration costs are principally dry hole costs associated with the drilling of non-productive exploratory wells. There is no way to predict these costs from quarter to quarter. The Company will continue exploratory wells, thus future dry holes are anticipated. Interest expense decreased in the 1998 period as all line-of-credit borrowings were paid off in fiscal 1997. The provision for income taxes is higher in the 1997 period due to the increase in income before taxes; however, the provision continues to be favorably affected by tax credits available from the Company's production of "tight gas sands" natural gas and from excess percentage depletion. Net income increased in the 1998 quarter as compared to the 1997 quarter. This increase resulted from the above discussed oil and gas sales revenues increase, offset, somewhat, by higher costs and expenses in the 1998 quarter. As both natural gas and oil sales prices are expected to decrease during the remainder of fiscal 1998 and production volumes are expected to be flat to somewhat decreased for oil and moderately increased for gas, the remainder of fiscal 1998 is expected to yield comparable, to the first quarter, financial results. However, should several of the Company's 1998 exploratory drilling projects result in dry holes, earnings would be negatively impacted. PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORT ON FORM 8-K (a) Exhibits - Exhibit 27 -- Financial Date Schedule (b) There were no reports on FORM 8-K filed for the three months ended December 31, 1997. 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 February 13, 1998 /s/ H W Peace II - --------------------------- ------------------------------------ Date H W Peace II, President and Chief Executive Officer February 13, 1998 /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 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS SEP-30-1998 OCT-01-1997 DEC-31-1997 1,117,938 0 1,101,084 0 0 2,230,760 25,832,292 15,538,023 12,632,745 903,353 0 0 0 67,982 10,414,410 12,632,745 1,809,769 1,826,939 283,955 791,443 0 0 0 751,541 165,000 586,541 0 0 0 586,541 .86 .86
-----END PRIVACY-ENHANCED MESSAGE-----