-----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, ET1Wif1W5rML+dw7CJ8TSFiedwVqmS0S8ug8y0C8ZyuYDCuyda8KYyqUiYYBtaDs 4K3l/u886ySx4sJU1PyWLw== 0000950134-03-002363.txt : 20030213 0000950134-03-002363.hdr.sgml : 20030213 20030213122226 ACCESSION NUMBER: 0000950134-03-002363 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030213 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09116 FILM NUMBER: 03557578 BUSINESS ADDRESS: STREET 1: 5400 NW GRAND BLVD STREET 2: GRAND CENTRE STE 210 CITY: OKLAHOMA CITY STATE: OK ZIP: 73112 BUSINESS PHONE: 4059481560 10-Q 1 d03136e10vq.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended December 31, 2002 ----------------------------------------------------- ( ) 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 3, 2003: 2,082,190 - --------- INDEX
PAGE Part I. Financial Information Item 1. Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - December 31, 2002 and September 30, 2002.................. 1 Condensed Consolidated Statements of Operations - Three Months Ended December 31, 2002 and 2001............. 2 Condensed Consolidated Statements of Cash Flows - Three Months Ended December 31, 2002 and 2001............. 3 Notes to Condensed Consolidated Financial Statements...... 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 5 Item 3. Quantitative and Qualitative Disclosures about Market Risk...................................................... 7 Item 4. Controls and Procedures................................... 8 Part II. Other Information ................................................ 8 Signatures........................................................ 8 Certifications.................................................... 9-10
PART I. FINANCIAL INFORMATION PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Information at December 31, 2002 is unaudited)
December 31, September 30, Assets 2002 2002 ------------ ------------ Current assets: Cash and cash equivalents $ 155,696 $ 242,836 Oil and gas sales receivable 3,201,905 2,533,249 Prepaid expenses 41,563 5,709 ------------ ------------ Total current assets 3,399,164 2,781,794 Properties and equipment, at cost, based on successful efforts accounting: Producing oil and gas properties 60,894,261 58,697,095 Non producing oil and gas properties 9,821,964 9,754,336 Other 362,958 360,784 ------------ ------------ 71,079,183 68,812,215 Less accumulated depreciation, depletion and amortization 29,365,464 27,860,713 ------------ ------------ Net properties and equipment 41,713,719 40,951,502 Investment in partnerships 827,500 856,607 Marketable securities and other assets 247,157 247,157 ------------ ------------ Total Assets $ 46,187,540 $ 44,837,060 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,046,849 $ 653,758 Accrued liabilities: Deferred compensation 368,570 321,555 Dividends 145,753 -- Interest 60,042 66,567 Other 132,961 133,308 Income taxes payable 44,811 10,063 Current portion of long-term debt 3,996,000 3,996,000 ------------ ------------ Total current liabilities 5,794,986 5,181,251 Long-term debt 13,925,000 14,024,000 Deferred income taxes 8,857,500 8,639,000 Other 301,260 39,515 Stockholders' equity: Class A voting Common Stock, $.0333 par value; 6,000,000, shares authorized, 2,079,100 issued and outstanding at December 31, 2002 and 2,079,423 at September 30, 2002 69,303 69,314 Capital in excess of par value 891,963 896,643 Retained earnings 16,347,528 15,987,337 ------------ ------------ Total stockholders' equity 17,308,794 16,953,294 ------------ ------------ Total liabilities and stockholders' equity $ 46,187,540 $ 44,837,060 ============ ============
(1) PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended December 31, 2002 2001 ------------- --------------- Revenues: Oil and gas sales $ 4,398,987 $ 3,184,874 Lease bonuses and rentals 16,844 19,899 Interest and other 45,173 90,466 Equity in income of partnerships 2,744 35,322 ------------ ------------ 4,463,748 3,330,561 Costs and expenses: Lease operating expenses and production taxes 938,583 839,417 Exploration costs 215,174 60,928 Depreciation, depletion, amortization and impairment 1,581,389 1,643,277 General and administrative 710,145 641,658 Interest expense 188,476 247,518 ------------ ------------ 3,633,767 3,432,798 ------------ ------------ Income (loss) before provision for income taxes and cumulative effect of accounting change 829,981 (102,237) Provision (benefit) for income taxes 225,000 (25,381) ------------ ------------ Income (loss) before cumulative effect of accounting change 604,981 (76,856) Cumulative effect of accounting change, net of taxes of $28,500 46,500 -- ------------ ------------ Net Income (loss) $ 651,481 $ (76,856) ============ ============ Basic earnings (loss) per common share (Note 3) Income before cumulative effect of accounting change $ .29 $ (.04) Cumulative effect of accounting change .02 -- ------------ ------------ Net Income $ .31 $ (.04) ============ ============ Diluted earnings (loss) per common share (Note 3) Income before cumulative effect of accounting change $ .29 $ (.04) Cumulative effect of accounting change .02 -- ------------ ------------ Net Income $ .31 $ (.04) ============ ============ Dividends declared per share of common stock $ .07 $ .0 ============ ============ Dividends declared per share of common stock for and to be paid in the quarter ended March 31 (Note 5) $ .07 $ .07 ============ ============
(2) PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended December 31, 2002 2001 --------------- ------------ Cash flows from operating activities: Net income $ 651,481 $ (76,856) Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of change in accounting principle (46,500) -- Depreciation, depletion, amortization and impairment 1,581,389 1,643,277 Exploration costs 215,174 60,928 Equity in income of partnerships (2,744) (35,322) Other non-current liabilities 11,745 1,679 Provision (benefit) for deferred income taxes 190,000 (30,000) Cash provided (used) by changes in assets and liabilities, excluding those acquired in Wood Oil acquisition: Oil and gas sales receivable (673,656) (89,679) Income taxes receivable -- 415,810 Prepaid expenses and other assets (35,854) 223,196 Income taxes payable 34,748 -- Accounts payable and accrued liabilities 433,234 (69,056) --------------- ------------ Total adjustments 1,707,536 2,120,833 --------------- ------------ Net cash provided by operating activities 2,359,017 2,043,977 Cash flows from investing activities: Acquisition of Wood Oil, net of cash acquired -- (15,229,466) Purchase of and development of properties and equipment (2,233,780) (2,367,539) Distributions from partnerships 36,851 94,036 --------------- ------------ Net cash used in investing activities (2,196,929) (17,502,969) Cash flows from financing activities: Borrowings under credit agreements 900,000 20,150,000 Payments of loan principal (999,000) (4,383,000) Acquisition of common shares (4,691) -- Payments of dividends (145,537) (144,652) --------------- ------------ Net cash provided (used) by financing activities (249,228) 15,622,348 --------------- ------------ Increase (decrease) in cash and cash equivalents (87,140) 163,356 Cash and cash equivalents at beginning of period 242,836 98,970 --------------- ------------ Cash and cash equivalents at end of period $ 155,696 $ 262,326 =============== ============
(See accompanying notes) (3) PANHANDLE ROYALTY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1: Accounting Principles and Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q as prescribed by the Securities and Exchange Commission, and effective October 1, 2001, include the Company's wholly-owned subsidiary, Wood Oil Company (Wood). Management of Panhandle Royalty Company believes that all adjustments necessary for a fair presentation of the consolidated financial position and 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. NOTE 2: Income Taxes The Company utilizes tight gas sands production tax credits to reduce its federal income tax liability, if any. These credits are scheduled to be available through calendar year 2002. The Company's provision for income taxes is also reflective of excess percentage depletion, reducing the Company's effective tax rate from the federal statutory rate. NOTE 3: Earnings (Loss) Per Share The following table sets forth the number of shares utilized in the computation of basic and diluted earnings (loss) per share, giving consideration to, certain shares that may be issued under the Non-Employee Director's Deferred Compensation Plan, to the extent dilutive:
Three months ended December 31, 2002 2001 -------------- -------------- Denominator: For basic earnings per share Weighted average shares 2,079,100 2,066,441 Effect of potential diluted shares: Directors deferred compensation shares 22,702 -- ------------ ------------ Denominator for diluted earnings per share - adjusted weighted average shares and potential shares 2,101,802 2,066,441 ============ ============
NOTE 4: Long-term Debt The Company has a $5,000,000 line-of-credit with BancFirst in Oklahoma City, OK. This facility matures on January 31, 2005. At December 31, 2002, the Company had $2,250,000 outstanding under the BancFirst facility ($2,875,000 at February 5, 2003). In addition, on October 1, 2001, the Company utilized a $20,000,000 five year term loan from BancFirst to make the Wood Oil acquisition. Monthly payments on the term loan, which began in December 2001, are $333,000 plus, accrued interest. At December 31, 2002 the outstanding balance of the term loan was $15,671,000. The line-of-credit and term loan bear interest equal to the national prime rate minus 1/4% (4.0% at December 31, 2002). NOTE 5: Dividends On December 18, 2002, the Company's Board of Directors approved payment of a $.07 per share dividend, to be paid on March 17, 2003, to shareholders of record on February 14, 2003. (4) NOTE 6: Recently Issued Accounting Pronouncements In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations (SFAS No. 143). SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Subsequently, the asset retirement cost should be allocated to expense using a systematic and rational method and the liability should be accreted to its face amount. The Company adopted SFAS No. 143 on October 1, 2002. The primary impact of this standard relates to oil and gas wells on which the Company has a legal obligation to plug and abandon the wells. Prior to SFAS No. 143, the Company had not recorded an obligation for these plugging and abandonment costs due to its assumption that the salvage value of the surface equipment would offset the cost of dismantling the facilities and carrying out the necessary clean-up and reclamation activities. The adoption of SFAS No. 143 on October 1, 2002, resulted in a net increase to Property and Equipment and Retirement Obligations of approximately $325,000 and $250,000, respectively, as a result of the Company separately accounting for salvage values and recording the estimated fair value of its plugging and abandonment obligations on the balance sheet. The impact of adopting SFAS No. 143 has been accounted for through a cumulative effect adjustment that amounted to $46,500, net of taxes ($.02 per share). The increase in expense resulting from the accretion of the asset retirement obligation and the depreciation of the additional capitalized well costs is expected to be substantially offset by the decrease in depreciation from the Company's consideration of the estimated salvage values in the calculation. In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. It supercedes, with exceptions, SFAS No. 121. SFAS No. 144 was adopted by the Company on October 1, 2002. The adoption of SFAS No. 144 had no material impact on the Company's financial position or results of operations. In June 2002, FASB issued SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. The pronouncement is effective for exit or disposal activities initiated after December 31, 2002. Management does not believe that the adoption of SFAS 146 will have any material impact on its financial position or results of operations in the near term. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS AND RISK FACTORS Forward-Looking Statements for 2003 and later periods are made in this document. Such statements represent estimates of management based on the Company's historical operating trends, its proved oil and gas reserves and other information currently available to management. The Company cautions that the forward-looking statements provided herein are subject to all the risks and uncertainties incident to the acquisition, development and marketing of, and exploration for oil and gas reserves. These risks include, but are not limited to, oil and natural gas price risk, environmental risks, drilling risk, reserve quantity risk and operations and production risk. For all the above reasons, actual results may vary materially from the 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, 2002, the Company had negative working capital of $2,395,822, as compared to negative working capital of $2,399,457 at September 30, 2002. Negative working capital is a result of $3,996,000 being recorded as the current portion of the $20,000,000 term loan used to fund the acquisition of Wood Oil Company ("Wood Acquisition") on October 1, 2001. Monthly payments on the term loan of $333,000, plus, accrued interest began on December 1, 2001. Cash flow from operating activities increased 15% to $2,359,017 for the first three-months of fiscal 2003, as compared to the first three-months of fiscal 2002, primarily due to a significant increase in product sales prices. Capital expenditures for oil and gas activities for the 2003 three-month amounted to $2,233,780, as compared to $2,367,539 for the 2002 period exclusive of $15,229,466 used to acquire Wood Oil Company. Capital expenditures are anticipated to increase through fiscal 2003 as the increase in product prices should cause an increase in drilling activity as the year progresses. Management's capital expenditures budget is approximately $9,000,000 for fiscal 2003. The Company has historically funded its capital expenditures, overhead expenditures and dividend payments from operating cash flow. With the addition of the monthly payments required on the term loan, the Company has utilized (as of February 5, 2003), $2,875,000 (5) of the $5,000,000 line-of-credit to help fund these expenditures. Management expects to borrow additional funds under the line-of-credit during the remainder of fiscal 2003. The Company may seek to expand the line-of-credit, if needed. Also the Company has the potential availability of equity, which could be offered in a public or private placement, if additional capital were needed for capital expenditures, or for debt reduction, or a combination of uses. RESULTS OF OPERATIONS Revenues: Total revenues increased $1,133,187 or 34% for the 2003 quarter as compared to the 2002 quarter. Sales volumes for both oil and natural gas decreased due to normal production decline in the 2003 quarter but the substantial increase in average sales prices for both products produced the revenue increase. The table below outlines the Company's production and average sales prices for oil and natural gas for the three month periods of fiscal 2003 and 2002:
BARRELS AVERAGE MCF AVERAGE SOLD PRICE SOLD PRICE ------- ------- --------- ------- Three months ended 12/31/02 27,609 $ 27.76 951,535 $ 3.82 Three months ended 12/31/01 34,149 $ 18.68 1,048,648 $ 2.41
As the table outlines the 49% increase in oil price and the 59% increase in gas price more than offset the 11% decline in equivalent production to 1,117,189 mcfe. These price increases resulted in a 38% increase in oil and gas revenue for the quarter. Lease Operating Expenses and Production Taxes (LOE): LOE increased 12% or $99,166 in the 2003 quarter. Production taxes increased in the 2003 quarter as oil and gas sales revenues increased and production taxes are paid as a percentage of oil and gas sales revenue. In addition, well operating costs continue to increase as the Company adds operating costs from the substantial number of new wells drilled each year. Exploration Costs: These costs increased $154,246 in the 2003 period as there were several exploratory wells which completed drilling in 2003, thus increasing the chances of drilling an exploratory dry hole, which costs are charged to exploration costs in the period incurred. One well accounted for approximately $125,000 of the increase. Depreciation, Depletion, Amortization and Impairment (DD&A): DD&A decreased $61,888 or 4% in the 2003 period. This decrease was principally the result of decreased production volumes reducing the units of production DD&A calculations for the quarter. General and Administrative Costs(G&A): G&A expenses increased $68,487 or 11% in the 2003 period. The increase was due to increased professional service fees in the 2003 period for legal, reservoir engineering and audit services. In addition, a charge of $35,000 was incurred for the Non-Employee Directors Deferred Compensation Plan due to Panhandle's common share price increasing from September 30 to December 31, 2002. Interest Expense: Interest expense decreased in the 2003 quarter due to a lower level of debt and due to a decrease in the interest rate on the debt. The interest rate is 1/4% below prime rate and the prime rate decreased throughout fiscal 2002. Income Taxes: The 2003 period provision for income taxes increased due to substantially increased income before provision for income taxes. The Company utilizes tight gas sands production tax credits (available through calendar year 2002) and excess percentage depletion to reduce its effective tax rate from the federal statutory rate. The effective tax rate estimate was 27% and 25% for the 2002 and 2001 periods, respectively. (6) Overview: The Company recorded a first quarter 2003 net income of $651,481, or $.31 per share, as compared to a $76,856 net loss or $.04 per share, in the 2002 quarter. The improved 2003 quarter results were due to substantial increases in the sales price of both oil and natural gas and partially offset by modestly higher costs and expenses. CRITICAL ACCOUNTING POLICIES Preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. However, the accounting principles used by the Company generally do not change the Company's reported cash flows or liquidity. Generally, accounting rules do not involve a selection among alternatives, but involve a selection of the appropriate policies for applying the basic principles. Interpretation of the existing rules must be done and judgements made on how the specifics of a given rule apply to the Company. The more significant reporting areas impacted by management's judgements and estimates are crude oil and natural gas reserve estimation, impairment of assets and tax accruals. Management's judgements and estimates in these areas are based on information available from both internal and external sources, including engineers, geologists and historical experience in similar matters. Actual results could differ from the estimates as additional information becomes known. Oil and Gas Reserves Of these judgements and estimates, management considers the estimation of crude oil and natural gas reserves to be the most significant. Changes in crude oil and natural gas reserve estimates affect the Company's calculation of depreciation and depletion, provision for abandonment and assessment of the need for asset impairments. The Company's consulting engineer with assistance from Company geologists 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. These estimates are generally updated only annually unless the Company experiences a significant production volume change on a significant holding. As required by the guidelines and definitions established by the Securities and Exchange Commission, these quarterly estimates are based on then current crude oil and natural gas pricing. As previously discussed, crude oil and natural gas prices are volatile and largely affected by worldwide consumption and are outside the control of management. Projected future crude oil and natural gas pricing assumptions are used by management to prepare estimates of crude oil and natural gas reserves used in formulating managements overall operating decisions in the exploration and production segment. Successful Efforts Method of Accounting The Company has elected to utilize the successful efforts method of accounting for its oil and gas exploration and development activities. Exploration expenses, including geological and geophysical costs, rentals and exploratory dry holes, are charged against income as incurred. Costs of successful wells and related production equipment and developmental dry holes are capitalized and amortized by field using the unit-of-production method as oil and gas is produced. The accounting method may yield significantly different operating results than the full cost method. Impairment of Assets All long-lived assets are monitored for potential impairment when circumstances indicate that the carrying value of the asset may be greater than its future net cash flows. The evaluations involve a significant amount of judgement since the results are based on estimated future events, such as inflation rates, future sales prices for oil and gas, future costs to produce these products, estimates of future oil and 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 gas reserves. Any assets held for sale are reviewed for impairment when the Company approves the plan to sell. Estimates of anticipated sales prices are highly judgmental and subject to material revision in future periods. Because of the uncertainty inherent in these factors, the Company cannot predict when or if future impairment charges will be recorded. Tax Accruals The estimation of the amounts of income tax to be recorded by the Company involves interpretation of complex tax laws and regulations. Although the Company's management believes its tax accruals are adequate, differences may occur in the future depending on the resolution of pending and new tax matters. (7) The above description of the Company's critical accounting policies is not intended to be an all-inclusive discussion of the uncertainties considered and estimates made by management in applying accounting principles and policies. Results may vary significantly if different policies were used or required and if new or different information becomes known to management. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company's results of operations and operating cash flows are impacted by changes in market prices for oil and gas. Operations and cash flows are also impacted by changes in the market interest rates related to the revolving credit facility and the $20 million five-year term loan, both bearing interest at an annual variable interest rate equal to the national prime rate minus 1/4%. A one percent change in the prime interest rate would result in approximately a $180,000 change in annual interest expense. ITEM 4. CONTROLS and PROCEDURES Panhandle Royalty Company management, including, the Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion. There have been no significant changes in our internal controls or in factors that could significantly affect internal controls, subsequent to the date of the Chief Executive Officer and Chief Financial Officer completed their evaluation. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORT ON FORM 8-K (a) EXHIBITS - Exhibit 99.1 and 99.2 - Certification under Section 906 of the Sarbanes-Oxley Act of 2002 (b) Form 8-K - There were no reports on Form 8-K filed for the three months ended December 31, 2002. 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 11, 2003 /s/ H W Peace II - ------------------------ ----------------------------- Date H W Peace II, President and Chief Executive Officer February 11, 2003 /s/ Michael C. Coffman - ------------------------ ----------------------------- Date Michael C. Coffman, Vice President, Chief Financial Officer and Secretary and Treasurer (8) CERTIFICATION I, H W Peace II, certify that: 1. I have reviewed this quarterly report on Form 10-Q; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a). designed such disclosure controls and procedures 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 quarterly report is being prepared; b). evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c). presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a). all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b). any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regards to significant deficiencies and material weaknesses. Date: February 11, 2003 /s/ H W Peace II ----------------------- H W Peace II Chief Executive Officer (9) CERTIFICATION I, Michael C. Coffman, certify that: 1. I have reviewed this quarterly report on Form 10-Q; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a). designed such disclosure controls and procedures 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 quarterly report is being prepared; b). evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c). presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a). all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b). any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regards to significant deficiencies and material weaknesses. Date: February 11, 2003 /s/ Michael C. Coffman ----------------------- Michael C. Coffman Chief Financial Officer (10) EXHIBIT INDEX
EXHIBIT INDEX DESCRIPTION - ------- ----------- 99.1 Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
EX-99.1 3 d03136exv99w1.txt CERTIFICATION OF CEO UNDER SECTION 906 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Panhandle Royalty Company ("Panhandle") on Form 10-Q for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, H W Peace II, Chief Executive Officer of Panhandle, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Panhandle. /s/ H W Peace II - ----------------------- H W Peace II President & Chief Executive Officer February 11, 2003 EX-99.2 4 d03136exv99w2.txt CERTIFICATION OF CFO UNDER SECTION 906 EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Panhandle Royalty Company ("Panhandle") on Form 10-Q for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael C. Coffman, Chief Financial Officer of Panhandle, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Panhandle. /s/ Michael C. Coffman - ----------------------- Michael C. Coffman Vice President & Chief Financial Officer February 11, 2003 -----END PRIVACY-ENHANCED MESSAGE-----